The government said it had accepted a recommendation from the Overseas Investment Office (OIO) to refuse Hong-Kong listed Natural Dairy (NZ) Holdings' 200 million-plus New Zealand dollar (150 million US) offer for Crafar Farms.

OIO manager Annelies McClure said there were concerns that one of the people involved in the bid had been declared bankrupt.

"The (government) ministers were not satisfied that all of the individuals with control of Natural Dairy were of good character," McClure said in a statement.

New Zealand is the world's largest dairy exporter and has seen overseas interest in the sector increase amid rising demand from Asia.

Natural Dairy had planned to buy the Crafar farms and a treatment plant to produce long-life packaged milk for sale in China.

But the application prompted a high-profile campaign against foreign land ownership, including a newspaper advertising campaign by a group called "Save Our Farms" whose members included high-profile business executives and lawyers.

Land Information Minister Maurice Williamson caused a storm in September when he said opposition to foreign land ownership was often more about "racism" than economic concerns.

At the time, Prime Minister John Key, whose conservative government has a strong rural constituency, dismissed Williamson's remark as a joke but added that New Zealanders did not want to become "tenants in their own land".

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