China's Reach

GEVREY-CHAMBERTIN, France (AP) — Life in this French village revolves around wine. The backyards of its tidy houses nurture the grapes that have made Burgundy famous the world over. At an auto repair shop, everyone seems to have an opinion about the recent sale of a local vineyard to a Macau casino magnate. "It's a piece of French heritage that's heading abroad," says mechanic Bertrand Babouhot. Across the road, rows of gnarled vines lead to the rundown chateau that was sold. "It's like selling the Eiffel Tower to the Americans." On the other side of the globe, farmer Margaret Peacock expresses similar outrage over the sale of 13 dairy farms in New Zealand's rural heartland to a wealthy property developer from Shanghai. ___ EDITOR'S NOTE — This story is part of "China's Reach," a project tracking China's influence on its trading partners over three decades and exploring how that is changing business, politics and daily life. Keep up with AP's reporting on China's Reach, and join the conversation about it, using the hashtag (hash)APChinaReach on Twitter. ___ Such sentiments have long been directed at Americans and Japanese. Now it's China's turn, a sign that the new economic giant is beginning to usurp America's role as a leading trader and global investor. Crushing grapes in France and milking cows in New Zealand represent much more than ways to make a living. Both are traditions that cut to the core of cultural identity, forming part of a national heritage the French call "patrimoine." So when outsiders pay substantially above market rates to buy such assets, it often awakens deep feelings of unease. Many recognize that the foreigners are providing much-needed cash to often struggling industries, but they also fear losing a part of their country's soul and the intellectual capital that adds value to their economy. China's overseas investment totaled $67.6 billion last year, one sixth of America's $400 billion, and could reach $2 trillion by 2020, forecasts Rhodium Group, a New York research firm. While much money has poured into mining and other relatively anonymous businesses, Chinese investors have also set their sights on such iconic assets as automaker Volvo in Sweden, corner bars in Madrid and farmland in Argentina. Sometimes, as in Sweden, the investment is accepted in the face of few other serious offers for a struggling company. Under Chinese ownership, Volvo has added about 2,000 workers in Europe. Other times, as in New Zealand, the reaction is a lawsuit — even if the would-be buyer is rescuing a bankrupt farm. "If they want to buy land, they should come and live here and farm it themselves," Peacock says over a cup of tea. "Like the rest of us." It can be hard to distinguish where genuine concerns end and xenophobia begins. After all, China is just the latest in a long line of foreign buyers, but with a culture that many in the West find more alien than those that came before. Gevrey-Chambertin is the kind of French village where the waiter chastises diners who don't order a glass of locally made wine, even at a midweek lunch. So when Louis Ng Chi Sing purchased the thousand-year-old Chateau de Gevrey-Chambertin and some surrounding vineyards in May for 8 million euros ($10.5 million) it set off a firestorm. The 24-hour news channels descended on the village, and the national newspapers wrote up full-page stories chronicling the loss of a piece of France to "le Chinois," French for a Chinese person. Ng is actually from Hong Kong and works in Macau. While both are Chinese territories, their economies are measured separately from China's, so his vineyard purchase wouldn't be included in China's overseas investment. The backlash against him, though, is closely linked to China — as is his casino fortune. Mainland tourists, notably high-rollers who frequent flashy private rooms, have helped Macau overtake Las Vegas as the world's biggest gambling market. Grape growers in Gevrey-Chambertin say the price Ng paid is exorbitant and threatens their ability to keep their vineyards in family hands. Jean-Michel Guillon, who led a local bid to buy the chateau, says a state agency valued the estate at 3.5 million euros. His group first offered 4 million euros, then 5 million, but the Masson family, which has owned the estate for more than 150 years, refused. "They said, 'We want more, we want a million each,'" Guillon says in his cellar, surrounded by barrels of fermenting grape juice. "There are seven of them, so 7 million, minimum." In some ways, China has become a savior for some French vineyards, although few in France are willing to say that out loud. China is now a major buyer of wine, picking up the slack as sales to other countries slip. Indeed, China has become Bordeaux's largest export market. But Burgundy is not Bordeaux. It is inland, with smaller family farms and a stronger sense of tradition. People here have cherished their simple way of life for centuries. In an email, Ng, a serious wine collector and connoisseur, says it was the quiet, enduring traditions that first drew him to the Burgundy region and he promised not to ruin that. He describes his purchase of the chateau not as a business opportunity, but in the way most people explain why they bought their summer house. "While I can appreciate their concern to some extent, I honestly don't see my purchase would constitute the beginning of a radical change of an age-old tradition," he writes. Still, Guillon says that, because of China's reputation for counterfeit products, he worried that Ng would slap the Gevrey-Chambertin label on any old wine — though France has extensive protections against such fraud and there's no suggestion Ng has such plans. Others see the sale as an opportunity. The vineyard has never produced great wines and the respected local vintner whom Ng has hired is likely to raise their quality. Most important, Ng's interest in the village will shine a spotlight on its wines, another local winemaker, Gerard Quivy, says. "This can only help increase the value of Burgundy's wines." A similar battle is playing out in New Zealand's rural Waikato region, where winding roads thread across one-lane bridges, past giant ferns and sprawling farms. Life in the town of Reporoa is much like it has always been. It's a place where a mother pushes a stroller down the middle of the road, her pet cat prancing along behind. Where twice a day, children help round up cows many times larger than themselves for milking. Yet things did change in the boom before the global financial crisis. Banks let Allan and Frank Crafar leverage their farm to buy more and more land until they owned 20,000 cows and had become the biggest family dairy farmers in the country. When the market for dairy products plunged, the brothers were caught out with massive debts, and their operation was forced into bankruptcy in 2009. Last year, Chinese developer Jiang Zhaobai stepped in. His company, Shanghai Pengxin, won a bid to buy and fix up the Crafar's 13 dairy and three cattle and sheep farms with an offer of more than 200 million New Zealand dollars ($165 million). Like in France, the outcry was quick and loud. "New Zealanders have every reason to feel outraged and betrayed," opposition lawmaker Winston Peters said. "Our country is being run for the benefit of foreign companies and the international money industry." Farmers in New Zealand, like the vintners in France, fear for the integrity of their brand. They worry that Chinese milk will be sold under a New Zealand label. Adding to their worries is a 2008 case, in which six babies in China died and another 300,000 were sickened by infant formula that was tainted with melamine, an industrial chemical added to watered-down milk to fool tests for protein levels. A local consortium of businessmen, farmers and indigenous Maori appealed the sale in court, arguing it didn't meet requirements that sales of farms to foreigners benefit the country and that the investor has relevant business experience and acumen. The group put in a counter offer: 171 million New Zealand dollars, which they claimed was a fair market price. Lower courts rejected their appeal and, in October, the Supreme Court decided not to hear the case, allowing the sale to proceed. For Shanghai Pengxin, the purchase was an opportunity to expand its fledgling farming interests. Among those who can afford it, baby formula made with New Zealand milk is highly valued in China because it is seen as pure, particularly in light of the melamine scandal. Shanghai Pengxin spokesman Cedric Allan says he and the company were taken by surprise at the nationwide outcry. "There was no significant Chinese investment in New Zealand farms before, so that was a first. And the size of China makes people more apprehensive than they are about other countries," he said. "There was also an emotional campaign run against the purchase, the likes of which I haven't seen before. I guess in times of financial uncertainty, people say 'Heavens. Should we really be selling farms overseas?'" Edward Moana-Emery spent five weeks this year camped on one of the farms in protest before he was arrested by police. Standing outside his tribe's "wharenui," or meeting house, he summons the spirits of his Maori ancestors. He says his tribe — the Ngati Rereahu — wants to buy back two of the farms, because they hold special historical significance and were improperly taken away by British settlers. China should understand the significance of losing land, because Hong Kong was taken by the British, he says. "They gave Hong Kong back to you Chinese. You fellows had all the celebrations. How do you think we feel? Because we have lost the land for 126 years." Allan says the company is willing to meet with the tribe about the two farms, but "whether they get a deal depends on whether it works for us and them. As an overseas investor, it's very hard to buy farms, and we don't sell them lightly." In Argentina, a town in Rio Negro province prevented a Chinese company from signing a 30-year lease for nearly 800,000 acres of farmland on the grounds that agriculture on that scale would interfere with traditional cattle-raising in an area steeped in the gaucho, or cowboy, myth. The order blocking the lease said the deal would have forced the local people to watch their history and tradition "flow as if draining the blood from our soil for the destined ports of others." Still, many farmers in New Zealand are acutely aware of the importance of China, which has become by far the largest buyer of the country's dairy products. Over the past decade, New Zealand's trade with China has more than doubled as a percentage of GDP, and China has overtaken the U.S. as New Zealand's second-largest export market after Australia. "The whole question of foreign investment is always an emotional one," says Brian Hanna, the mayor of Te Kuiti, another Waikato town, and a farmer himself. "I think land is important. But we can't have our cake and eat it. We need overseas investment and we are not big enough to sustain our own economy at the moment." Around the globe, there remains a more existential fear: that China is buying up farmland to ensure food supply for its 1.3 billion people. But Xu Jianguo, China's ambassador to New Zealand, says Chinese investors simply see a market opportunity. In fact, he says China's strategy is quite the opposite. No other country would have the ability to feed China in a food crisis, he says, and any dependence on other countries could be used as a weapon against China. "With the improvement of Chinese people's living standards and welfare, we do have high-end consuming needs," Xu says. "Yes, we do import a lot of red wines from France and dairy products from New Zealand. But that volume compared to the total needs of the Chinese market is ... " He laughs, trying to find the English language analogy to describe something so tiny. ___ Perry reported from the Waikato region in New Zealand. Associated Press writers Kelvin Chan in Hong Kong, Jack Chang in Mexico City, Joe McDonald in Beijing, Karl Ritter in Stockholm and Alan Clendenning in Madrid contributed. ___ Follow Sarah DiLorenzo at http://twitter.com/sdilorenzo EDITOR'S NOTE _ This story is part of "China's Reach," a project tracking China's influence on its trading partners over three decades and exploring how that is changing business, politics and daily life. Keep up with AP's reporting on China's Reach, and join the conversation about it, using the hashtag #APChinaReach on Twitter.