BALI, Indonesia - Investment capital from China and other foreign sources is essential for New Zealand's agriculture sector to expand to meet growing international demand for food, the head of New Zealand's farming industry group said Thursday.

Federated Farmers President Bruce Wills, who is attending the World Trade Organization Ministerial Conference in Bali as part of the Cairns Group of 19 agricultural exporting countries, said New Zealand was "working through" issues behind controversies such as Shanghai Pengxin Group's purchase of 16 North Island dairy farms last year.

The purchase of pastoral land in New Zealand was "a sensitive area," but recent moves such as Shanghai Pengxin's takeover of South Island-based Synlait Farms indicated a more positive approach to the issue, Wills said in an interview with Xinhua.

"Agriculture in New Zealand is growing rapidly. We need capital to grow it as rapidly as we would like to grow it. We have a lack of capital in New Zealand, so we are reliant on money coming from somewhere. It either comes through debt or through equity investment from offshore," Wills said.

Federated Farmers had to balance between two groups of members: those who wanted the freedom to sell their farms to whomever they wanted; and those who aspired to help their children buy farms and were struggling to compete against foreign investors with large checkbooks.

However, New Zealand law and the requirements set by the Overseas Investment Office helped maintain an acceptable balance.

"I'm told that we're one of the toughest countries now in the OECD (Organization for Economic Cooperation and Development) to be able to get approval to buy pastoral rural property, so I'm reasonably comfortable that the balance is pretty good," said Wills.

Shanghai Pengxin's purchase of the 13 Synlait Farms with two New Zealand partners and plans to upgrade the properties was a good example of positive overseas investment.

"Talk of doing positive things for the environment; talk of enhancing the New Zealand farming system, giving opportunities to young New Zealanders to work on the farms I think those sorts of things will help ease the passage of potential buyers coming in," he said.

"New Zealand farmers are unashamed free traders and we talk with great pride about our 2008 free trade agreement with China, and that's been an absolute win-win."