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Shanghai Zhongfu – Ord River Project

Other Chinese investors address community relations and corporate social welfare on a larger scale. For example, open-cut coal mining firm, Shenhua Australia, has committed $5 million funding for local community activities near Gunnedah.
The commitment of Chinese investors to building up infrastructure in Australia and the challenges they face is well illustrated by the Ord River Project by Shanghai real estate investor Shanghai Zhongfu. The challenge for Shanghai Zhongfu was to integrate off-take from its planned Australian operation into the long supply chain of China’s domestic market.

Established in 1992, Shanghai Zhongfu Group is one of Shanghai’s largest private real estate developers, with over 20 years’ business experience. Over the years, the Group has developed some well-known buildings in Shanghai such as Zhongfu Building and is responsible for several old city reconstruction projects in Pudong and Puxi districts. Recently, Shanghai Zhongfu Group has expanded into areas such as network communications and auctioneering.

In 2012, Shanghai Zhongfu won the right to lease and develop the second stage of the Ord River irrigation area with 13,400 ha of land under its control and projected investment of $700 million in the local agriculture, processing and related infrastructure. Shanghai Zhongfu sees this project as its prime experiment in local integration.

Above all, the Ord River project is Shanghai Zhongfu’s first overseas investment project. As a diversifying property developer in China, Shanghai Zhongfu came across the opportunity to invest in Western Australian agriculture by chance and was helped by Western Australian contacts and the State government, which convinced the Chairman that an agricultural base in Australia was an opportunity for his company to tap into China’s fast growing demand for agricultural products.

Shanghai Zhongfu’s familiarity with China’s domestic market was crucial for making the investment decision. Originally Shanghai Zhongfu was planning to grow sugar cane, but then settled on sweet sorghum as a more suitable crop. Locally grown sorghum will first be processed in a sugar mill that Shanghai Zhongfu is building for AUD $250 million. It will then be shipped to China for further processing into ethanol and bio-fuel. In addition, Shanghai Zhongfu is introducing the cultivation of chia seeds which have been approved for food consumption in China. The Ord River region is one of the places suitable for the cultivation of chia seeds. Demand in China for this type of health food is strong.

More than a third of Zhongfu’s investment in the Ord River project will be in infrastructure. This includes construction of thermal power plants, railways and port expansion. Poor infrastructure has restricted the growth of local businesses as local products cannot be exported because the lack of rail and port infrastructure. Building local infrastructure will benefit Zhongfu as well as the local economy.