CHINESE company Shanghai Zhongfu has won the bid for 15,000ha of Ord River agricultural land in Western Australia's Kimberley region.

Shanghai Zhongfu is set to construct a $250 million sugar mill near Kununurra, and plans to produce and harvest four million tonnes of cane a year to turn into into sugar and biofuels.

WA Premier Colin Barnett and the state's Regional Development and Lands Minister Brendon Grylls confirmed the deal today.

It had been widely reported last week that the Chinese company had been granted the rights to the land made available by the second stage expansion of the Ord irrigation scheme.

"This is a historic moment in the history of Western Australia,'' Mr Barnett told ABC radio.

"We will have a major agricultural precinct in the Kimberley. It has taken 40 years to achieve, but it has been achieved.

"It will produce hundreds of millions of dollars of agricultural produce year in, year out.''

The little known Chinese conglomerate is believed to have beaten out a rival bid by Australian Agricultural Company (AACo), which wanted the land to grow cotton.

The Chinese investment is likely to cause controversy on two fronts, going against the idea of the Kimberley region as Australia's "food bowl'' to produce substantial crops, and selling more Australian agricultural land to foreign investors.

"Sugar is food,'' was Mr Barnett's immediate response.

Asked in July about potential Chinese investment, Prime Minister Julia Gillard said further opportunity in the region was desirable "but there's got to be all of the proper assessments''.

"The stage that this is at, is that there is a negotiation about various proposals involving the state government and traditional owners, and that will take a number of months to come,'' she said.

Australia's largest cotton farm, Cubbie Station in Queensland, was sold to a Chinese textile company in August.