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Chinese investment in Australia shrinks by 58%

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Chinese investment in Australia has fallen by 58 per cent in the past year, new research has found.

The report by KPMG and the University of Sydney has shown Chinese investment plummeted from $8.2 billion in 2018 to $3.5 billion last year. 

The total was the lowest since 2007, from a peak of $10.3 billion in 2017 – but China’s investment had dropped for the third year in a row.

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The number of completed deals fell by 43 per cent year-on-year to 42 in 2019.

But as Chinese inbound investment fell, bilateral trade grew by 21 per cent to a record $235 billion.

The biggest transaction was Mengniu Dairy Company’s acquisition of Bellamy’s Australia for $1.5 billion, which had accounted for 43.7 per cent of total Chinese investment. 

The deal also made food and agribusiness the largest sector recipient and Tasmania the state that received the largest percentage of investment for the first time, with 44 per cent of the annual total.

No investment was registered in the healthcare sector, making a “major change” from recent years.

Doug Ferguson, head of Asia and international markets at KPMG Australia commented there are many reasons for the decline, with no one country or issue being responsible. 

“Chinese companies have invested over US$107 billion into Australia since 2008 and this capital has been a really important contributor to economic growth locally but new investment is slowing,” Mr Ferguson said. 

“While deal activity will still continue because of the genuine complementarity between both nations and the large number of Chinese companies now established in Australia, we don’t expect to see a continuation of large-scale investment by new Chinese entrants in the [short to medium-term].”

Professor Hans Hendrischke from the University of Sydney Business School and China Studies Centre commented the decline of Chinese investment in Australia has mirrored the situation for a number of countries including the US, Canada and members of the European Union.

Australia had received around half the investment received by the US (US$5 billion), but more than Canada (US$1 billion).

“These countries are all implementing tighter foreign direct investment screening measures which [go] some way to explaining the fall in Chinese investment in Australia over the last financial year,” Professor Hendrischke said.

On Friday, Treasurer Josh Frydenberg flagged changes to foreign investment rules, including a new national security test, a tighter compliance and integrity framework and a streamlined process for passive investments. 

Dr Wei Li from the University of Sydney Business School said Chinese globalisation has taken a different trajectory, as Australia’s engagement with the country has reverted back to focus on trade relations.

Despite a year-on-year decline of 51 per cent, the commercial real estate sector was the second-largest recipient of Chinese investment in 2019, accounting for $1.5 billion. 

Chinese investment in the segment was largely directed for smaller acquisitions, with a little under 70 per cent of the transactions involving deal sizes of $50 million or less.

 

Chinese investment in Australia shrinks by 58%
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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