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Chinese investment in Australia fell to $6.2 billion last year, down more than 35 per cent to an eight-year low, according to the latest KPMG analysis.
A study by global professional services firm KPMG in collaboration with The University of Sydney, found that Chinese investment in Australia fell by 36.3 percent in 2018, despite China’s outward direct investment globally increasing by 4.2 percent to nearly $130 billion. Including mergers and acquisitions, joint ventures and greenfield projects, Chinese investment in Australia totaled $6.2 billion in 2018, down from $10 billion the previous year.
As part of the ongoing collaboration between the Big Four and Sydney Uni, the latest report in the ‘Demystifying Chinese Investment in Australia’ series of reports (now in its 15th edition) shows China’s domestic policy changes due to the downturn, with local declining investment rates now catching up with US trends and Canada, which saw Chinese inward investment decline by 83 percent and 47 percent (in USD terms) last year.
Policy measures implemented in China since early 2017, designed to reduce its international exposure, require foreign investments by Chinese firms to be non-speculative, made only after full consideration of major potential risks, and consistent with the company’s strategy and the country’s socio-economic conditions. development goals – with certain categories of investment encouraged and others prohibited or restricted.
With 80 per cent of Chinese executives saying it was more difficult to raise capital from China in 2018 compared to 65 per cent the previous year, the result is the second lowest Chinese inward investment in Australia since the peak of mining and gas investment in 2008. , with more than USD 16 billion coming into the country. Apart from the value of 3.9 billion USD in 2010, the investment amount did not fall below 8 billion USD in ten years.
However, despite domestic policy measures and a drop in inward investment, Australia is still seen as a relatively safe investment destination with an improving political climate (cautionary due to local political debate fell from 70 percent in 2017 to 59 percent last year) according to a cross-industry survey of Chinese executives, and a slight increase in feeling welcome – up three points to 38 percent, even though those who feel “not welcome”, also increased by four points to 19 percent.
“While Chinese investors confirm that they remain positive about many aspects of the Australian market and its prospects compared to many other countries, there are growing concerns about regulatory transparency, high costs and their continued perception that they are unwelcome as reflected in negative Australian media coverage . .” the report states. “We need to be aware of the very real impact that poorly received, politically motivated public discourse and unbalanced media coverage can have on the future level of Chinese capital entering Australia.”
In terms of investment breakdown, private Chinese companies accounted for 87 percent of deal value in 2018 and more than 92 percent of deal volume, with state-owned entities contributing just 13 percent of value and 8 percent of volume — down 28 percent overall from 102 deals in 2017 to 74 last year. According to these deals, more than 40 percent of total investment was in Australia’s healthcare sector, up more than 110 percent from the previous year.
According to analysts, Chinese investors are particularly interested in scalable medical services and healthcare products that can be scaled in their home market, and Australia’s healthcare sector has received increased interest in part due to the “Australian package” – “a combination of transferable management know-how, nursing experience at high standard, state-of-the-art technology, a ‘clean, green and healthy’ image of Australian products.”
Meanwhile, new investment in mining has fallen sharply – down 90 percent from last year’s rise to just 5.6 percent of the total – opening the door to commercial property (mostly mixed-use development and office stock, according to data provided by Knight Frank) to claim the second highest level of Chinese investment at ~37 percent (albeit down 31 percent from 2017). The remaining trade value was mostly in oil and gas (8.8 percent, up 295 percent) and renewable energy (4.8 percent, up 217 percent).
Perhaps worth noting, at least in terms of demystifying Sino-Australian investment, “Northern Australia” attracted at most only 8 per cent of total investment, with Queensland accounting for just 5 per cent, Western Australia 3 per cent and zero deals made in the northern part of the country. Territory. Here, the majority of inbound investment was made in New South Wales (56 per cent) and Victoria (27 per cent), with South Australia claiming most of the remainder (8 per cent).
“While this annual result takes China’s ODIs in Australia back to the second lowest level since 2008, there is no reason why Australia cannot return to historically high levels,” the report concluded. “2018 may not be a trend-defining year, but it is a time for reflection. There are many opportunities for Chinese companies to contribute to the development and internationalization of Australian industry and supply chains in the coming years, and much can be done to improve the perception of the Australian market by Chinese investors and vice versa.
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