Declining Chinese investment in Australia to hurt local economy

The decline of Chinese investment in Australia will have a negative impact on the Australian economy, especially on rising industries that benefited from good cooperation of both sides in the past, an analyst said.

Investment from China into Australia had an unusual slump of 40 percent in 2017, and it is likely see a further drop this year, as bilateral relations sour due to Australia’s growing concern of Chinese investment.

Chinese investment in Australia peaked in 2016 with $14.9 billion worth of transactions in the calendar year, followed by $8.9 billion in 2017, according to data issued on Monday by the Crawford School of Public Policy at the Australian National University.

“This is an unusual drop in Chinese investment into Australia,” noted the project’s leader Peter Drysdale, adding that the decrease was significantly larger than the 19.3 percent fall in China’s worldwide foreign direct investment.

The data revealed that from 2014 to 2017, while the mining industry was the dominant destination of Chinese funds, investment in real estate and transport infrastructure also accounted for a large proportion.

The causes of the dramatic drop include Australia’s tightening control on foreign investments, the changing investment context in the country, and China’s controls on irrational and low-quality overseas investments, said Zhang Jiayuan, partner at Beijing-based Ransenhuizhi Investment Fund Management Co.

The data showed that Chinese investments in real estate have dropped dramatically year after year since 2015, while investments in mining have grown steadily since then. Investments in healthcare showed a dramatic increase in 2016 but stayed stable in 2107.

Relations between the two nations have been under increasing pressure due to a diplomatic spat, sparked by concern in Australia about alleged Chinese meddling in government and the media, which China vehemently denied.

Zhang said that the drop will have a negative impact on Australia’s economy, adding that the influence will emerge in the future, especially in rising industries that benefited from cooperation with Chinese partners when the relationship was better years ago.