Australia needs foreign investment without the hostility: John Howard

Australia needs foreign investment without the hostility: John Howard

31 August 2017

Mr Howard said the rise in property prices was expected for any big city, but admitted that housing affordability was one area that Australia had gone backwards in.

“It’s a fundamental law of economics that if you’re going to have a growing population in a large urban concentration, you’re going to put a squeeze on housing prices. (But) we must not allow any of that to spill over into hostility to Chinese investment,” he said.

“In the long run, we would be crazy as a nation and it would be an act of self-destruction to ever become unfriendly towards foreign investment.”

Howard said although he did not believe China would ever surpass the United States “in aggregate powers and military strength”, China is “to all of you, an incredibly important economic partner”.

China, Australia’s top foreign investor in real estate, proposed to pump $31.9 billion in property down under in the 2015-16 financial year, while the US, the second-biggest foreign investor in real estate, pledged to invest $8.2 billion, according to the Foreign Investment Review Board’s latest report.

“Australia continues to be a major investment destination for Chinese capital and many Chinese real estate companies are serious about having some footprint [here],” Michael Zhang, head of JLL’s China desk, told the The Australian Financial Review.

“Australia’s average deal size is smaller than that of the US and the UK, which makes investing here accessible to investors of all sizes,” he said.

Howard described the public backlash on Chinese foreign investment in Australia as part of a “cycle”, pointing to the 1970s alarm at American investment in the motor manufacturing industry and the outrage at Japanese investment in the 1980s.

Chinese regulators have recently responded with their own hostility, putting their “big four” — HNA, Dalian Wanda, Fosun International and Anbang — under greater scrutiny.

Recently, Asia Real Estate Intelligence Source, Mingtiandi, reported that China’s Dalian Wanda Group had caved in to pressure from Beijing to crimp its offshore expansion and reduce debt. The company confirmed it was selling its stakes in real estate projects in the UK, US, China, and Australia. Wanda’s Australian assets included apartments and hotel developments in Sydney and the Gold Coast.

The Chinese government had previously encouraged overseas spending sprees, but then warned late last year of “irrational” acquisitions amid fears that powerful conglomerates were racking up dangerous debt levels.

The Chinese government recently said that it hopes to promote the “rational, orderly and healthy development of foreign investment while effectively guarding against risks”.

“There are great opportunities for our nation’s companies to embark on foreign investment, but they also face numerous risks and challenges,” the document released by the Chinese State Council said.

China’s National Development and Reform Commission have declared that the property sector was “not the real economy” and companies investing overseas in real estate could be harming China’s financial stability by increasing capital outflows.

The commission has labelled the overseas buying spree by China’s biggest private companies in recent years as “irrational”.

“Foreign investments that do not conform to China’s efforts towards peaceful development, mutually beneficial co-operation and to macroeconomic regulation are subject to restriction.”

Chinese outbound investment fell 44 per cent in the first seven months of 2017 as the Chinese government began cracking down on capital flight, and criticised Chinese companies buying trophy assets such as European football clubs, iconic hotels such as Club Med, and Hollywood studios, reported The Sydney Morning Herald.