A Deal for an Australian Dairy Wrapped in Layers of Chinese Loans

China has started to rein in big players like the Anbang Insurance Group, Fosun International, the HNA Group and Dalian Wanda, concerned that their piles of debt, largely from state-run banks, threaten the financial system and economic growth. Foreign governments, too, are wary of the flood of Chinese deals, with complex ownership structures that make it difficult to discern the strategic motivations and financial health of the buyers.

While Australian politicians generally view Chinese investment as advantageous, there are increasing worries that the government is approving deals by problematic companies aligned with a potential adversary. The attitudes toward Chinese money have been complicated by recent controversies about election-campaign donations from Australians of Chinese descent with links to the Chinese government.

The acquisition of the Tasmanian dairy, known as Van Diemen’s Land Company, or VDL, is spurring questions about whether the Australian government is fully assessing the risks.

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Lenders in Australia and China hold claims on the dairy, known as Van Diemen’s Land Company, or VDL.

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Brendon Thorne/Bloomberg

Major purchases by overseas buyers are vetted by Australia’s Foreign Investment Review Board. While the board analyzes deals for threats to the country’s national interests, its mandate does not require deep due diligence on the buyers’ finances.

“The Australian assumption has been that Chinese business operates like Australian ones,” said Peter Jennings, executive director of the Australian Strategic Policy Institute. “But they operate in ways that don’t fit with how we do business in the Australian economy.”

The review process, he said, appears to lack basic due diligence on potential foreign buyers. “If they have the capacity, they are very good at hiding it,” he said.

Mr. Lu is not the only Chinese buyer…

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