Chinese investment in Australia falls 36%

Chinese investment in Australia falls 36%

12 April 2019

Australia experienced its sharpest drop in Chinese investment for more than a decade last year due to Beijing’s clampdown on capital outflows and the demise of big mining and commercial property deals, reports the AFR.

The KPMG and the University of Sydney Business School report titled “Demystifying Chinese Investment in Australia,” says Chinese investment fell 36.3 per cent, or $8.2 billion, in 2018.

This means Australia has caught up with the United States, Canada, and the United Kingdom as a less favourable destination for Chinese capital.

“This annual result brings (new) Chinese direct investment in Australia back to the second lowest level since the mining and gas-driven investment peak of 2008,” KPMG’s head of Asia and International Markets, Doug Ferguson, told The Australian.

The year 2018 saw only 74 new deals done involving Chinese investors compared with 102 in 2017, he said.

The sharp fall in investment in Australia comes despite total outbound investment from China rising 4.2 per cent last year to $US130bn ($182bn).

KPMG said that Chinese investors still consider Australia as a relatively attractive country to invest their money, but policy changes in China are complicating matters.

China’s state-owned companies are instead diverting capital into Belt and Road infrastructure projects in Asia and central Europe under the government’s instructions, while private firms are increasingly focused on smaller deals in healthcare, Mr Ferguson said.

The report revealed there was also a drop in new investments in commercial real estate in Australia by Chinese investors.

While still the second-largest sector for Chinese investment, new commercial real estate deals were down by 37 per cent to just over $3bn last year. Yuhu Group’s $1.1 billion acquisition of Dalian Wanda’s property assets in Australia made up 31 per cent of the total.

Healthcare was the most popular sector for Chinese investors, overtaking commercial property for the first time.

“Large strategic investments in resources, energy and infrastructure have given way to smaller investments, into projects that are tactical and directly linked to Chinese consumer market demand,” said Hans Hendrischke, professor of Chinese Business & Management at the University of Sydney Business School.

“This is particularly evident in the targeting of the Australian healthcare sector by Chinese investors,” he added.

“At a time of global uncertainty, Australian politicians, bureaucrats, business leaders, educational organisations and others must work quietly and respectfully with their Chinese counterparts to allay community concerns and consolidate Australia’s reputation as a welcoming and proactive partner,” Professor Hendrischke said.

The KPMG/Sydney University survey looks at new investment deals worth more than $5m.

It excludes share market and portfolio investments and investments in residential real estate.