China pulling its cash
Australian investment drops more than half
CHINESE investment in Australia has fallen by almost 60 per cent as Beijing shifts its focus towards developing nations that have signed up for its Belt and Road Initiative.
Despite record trade between the two nations, Chinese investment in Australia fell from $8.2 billion in 2018 to $3.4 billion in 2019, with 43 per cent fewer deals struck.
A new report puts the plunge down to tighter Chinese regulations, a negative perception of Australia’s investment rules, and a shift towards Latin America and Belt and Road projects in developing countries.
The KPMG and University of Sydney study found new Chinese investment in Australia had plunged to the lowest levels since 2007.
Report author Hans Hendrischke said the decline mirrored similar patterns in other western countries. But he said Chinese investment into Australia had fallen at a faster rate than other nations, including the US.
Australian food and agricultural businesses were the biggest recipients of Chinese investment, with 44 per cent of the total funding flowing into the sector.
The result was largely driven by the acquisition of the Bellamy’s dairy company. The commercial real estate sector was the second largest recipient despite an annual decline of 51 per cent.
Significant Chinese investment also flowed into the mining and services sectors. Renewable energy projects accounted for 1 per cent of total Chinese investments and there were no recorded transactions in oil and gas, infrastructure or healthcare in 2019.
Report co-author Doug Ferguson expects Chinese investment in Australia to remain fairly subdued in the coming year.
“The impact of COVID-19 will no doubt have an ongoing influence as governments move to protect critical infrastructure and tech, and try to prevent opportunistic acquisitions of companies at undervalued prices,” he said. “Restrictions on travel have practically disabled new dealmaking and due diligence activity.”
However, Mr Ferguson said a large number of Chinese companies already operating in Australia would continue to strike deals and drive trade.
“The private sector will continue to be most active, deal sizes will be smaller, and most states and territories will continue to be active, with New South Wales and Victoria the largest and most attractive,” he said.