China-de­pen­dent econ­omy isn't so keen on Chi­nese money

The Pak Banker - - 6BUSINESS -

Aus­tralia, the de­vel­oped world's most China-re­liant econ­omy, of­fers a nat­u­ral des­ti­na­tion for bil­lions of dol­lars of in­vest­ment from its largest trad­ing part­ner. There's just one hur­dle -the Aus­tralians them­selves.

When Aus­tralia's largest dairy farm was sold to Chi­nese buy­ers last month, its big­gest tabloid pa­per howled that the gov­ern­ment was ' Milk­ing Us Dry!' by ap­prov­ing the deal. That chimes with a sur­vey show­ing most Aus­tralians think too much Chi­nese prop­erty buy­ing is al­lowed Down Un­der. The re­al­ity is China ac­counted for just over 4 per­cent of for­eign in­vest­ment at the end of 2014 -- slightly less than the Nether­lands.

With fed­eral elec­tions loom­ing as soon as July, nei­ther the rul­ing coali­tion nor the op­po­si­tion has yet sought to en­gage on the is­sue of Chi­nese money. Fail­ure to adapt risks for­go­ing much of a slice of the more than $1 tril­lion in out­bound in­vest­ment fund­ing that China has tar­geted for the decade to 2024, at a time when Aus­tralia is search­ing for growth driv­ers to re­place min­ing.

"Aus­tralia needs to start hav­ing the grown up con­ver­sa­tion that it has so far evaded," said Hugh White, a pro­fes­sor of strate­gic stud­ies at the Aus­tralian Na­tional Univer­sity in Can­berra. "China, even at lower growth rates, is go­ing to re­main the most im­por­tant source of eco­nomic op­por­tu­ni­ties for Aus­tralia."

China cur­rently ac­counts for about a third of Aus­tralia's trade, earn­ing the min­eral-rich coun­try the equiv­a­lent of 5 per­cent of its gross do­mes­tic prod­uct. That puts it in prime po­si­tion to ben­e­fit from Pres­i­dent Xi Jin­ping's pledge in Novem­ber 2014 that, as well as im­port­ing over $10 tril­lion of goods glob­ally in the com­ing five years, the na­tion planned out­ward in­vest­ment of $1.25 tril­lion over the fol­low­ing decade.

It's mak­ing a slow start Down Un­der. Ex­clud­ing res­i­den­tial prop­erty, in­vest­ment from China weak­ened in 2014 to $8.4 bil­lion be­cause of a shift away from re­sources, ac­cord­ing to a KPMG re­port. Much of the fo­cus from China now is in com­mer­cial prop­erty, in­fra­struc­ture and ser­vices in­dus­tries such as tourism and en­ter­tain­ment, where Aus­tralia could of­fer op­por­tu­ni­ties.

Stricter rules could be de­lay­ing such deals, with Aus­tralia vet­ting Chi­nese pur­chases far more closely than most oth­ers. The gov­ern­ment last year tight­ened scrutiny for sell­ing farm­land to Chi­nese buy­ers, mean­ing that pur­chases of A$15 mil­lion and over must be screened for ap­proval, along with the Ja­panese and Kore­ans. Amer­i­cans don't need per­mis­sion for sim­i­lar deals un­der A$1.1 bil­lion.

China also has the highest pro­por­tion of re­fer­rals to Aus­tralia's For­eign In­vest­ment Re­view Board of any na­tion. That's partly due to surg­ing de­mand for Aus­tralian real estate -which is fur­ther fuel­ing re­sent­ment Down Un­der as prices soar.

"Ev­ery time there's a new wave of in­vest­ment, as there was in the 1980s with the Ja­panese, there's the same sort of slo­gans, op­po­si­tion and fears," said Andrew Robb, for­mer trade min­is­ter and ar­chi­tect of the Aus­tralian side of the China-Aus­tralia free trade ac­cord that came into force last year. "We need for­eign in­vest­ment in this coun­try and I'm con­fi­dent that as it has in the past, this will set­tle down."

Aus­tralia could use more off­shore dol­lars, af­ter do­mes­tic busi­nesses cut back their spend­ing plans to the lowest level in nine years in the fourth quar­ter. That's dis­ap­point­ing for cen­tral bank Gover­nor Glenn Stevens, who had been count­ing on record-low in­ter­est rates and a weaker cur­rency to en­cour­age com­pa­nies out­side re­sources in­dus­tries to step up their spend­ing.

China's econ­omy may have ex­panded 6.9 per­cent in the first quar­ter from a year ear­lier fol­low­ing "some pos­i­tive sig­nals" from eco­nomic data in Jan­uary and Fe­bru­ary, China In­ter­na­tional Cap­i­tal Corp. econ­o­mists wrote in a March 28 re­search note.

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