GlobalData: China-Australia Tensions Scupper Dairy Deal

Wednesday, August 26th, 2020 | 395 Views


The current rocky relationship between Australia and China continues to affect the agri-food sector, Dean Best, Editor at Globaldata writes.

What a difference nine months makes.

Last November, Australia gave the green light to the sale of local infant-formula business Bellamy’s to Mengniu, one of China’s largest dairy groups. Today, Mengniu has been forced to walk away from another acquisition in Australia amid simmering tensions between Canberra and Beijing.

And there have to be question marks about the prospects for any future investment from China in Australia’s food industry – and for trade in agri-food products between the two countries. Mengniu’s acquisition of Bellamy’s was waved through last autumn by the Australian government, albeit with conditions.

However, the company’s planned purchase of dairy assets from Australian food and beverage Lion (a business owned by Japan’s Kirin Holdings) has hit the rocks amid the less-than-rosy relations between Australia and China. Australia argued Mengniu’s move for the Lion assets was “contrary to the national interest”, although it did not go into further detail.

The decision comes against the backdrop of a currently rocky relationship between Canberra and Beijing, the source of which is far removed from milk or yogurt. Ties have become strained amid Australia’s refusal to allow Huawei a piece of the country’s 5G network and amid Canberra’s call for an independent inquiry into Covid-19.

Beijing has slapped tariffs on Australia’s barley exports, placed restrictions on beef shipments and, last week, launched an anti-dumping probe on the Aussie wine industry. Given this context, it is hardly a surprise Australia effectively blocked Mengniu’s move for the Lion assets.

But the end of that proposed transaction is another sign of how relations between Australia and China are at a low ebb – and how the agri-food industry is being caught in the crossfire.

 

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