Despite record trading year, Chinese investment down last year
Chinese investment in Australia fell 58 percent from A$8.2 billion in 2018 to A$3.5 billion in 2019, according to a new report by KPMG and the University of Sydney.
In regards to bilateral trade between China and Australia in the 2018-2019 financial year, it was up 21 percent to a record A$235 billion but the number of deals dropped by 43 percent, from 74 to 42.
The biggest transaction was Mengniu Dairy Company’s acquisition of Bellamy’s Australia for A$1.5 billion, which accounted for 43.7 percent of total Chinese investment. This deal also made food and agribusiness the largest sector recipient with 44 percent of the annual total and Tasmania the region that received the largest percentage of investment for the first time, accounting for 44 percent of investment.
Chinese companies have invested over US$107 billion into Australia since 2008.
Report co-author, Professor Hans Hendrischke from the University of Sydney Business School and China Studies Centre said: “The decline of Chinese investment in Australia mirrors the situation for a number of western countries including the USA, Canada and members of the European Union.
“These countries are all implementing tighter foreign direct investment screening measures, which goes some way to explaining the fall in Chinese investment in Australia over the last financial year.”
“For the third consecutive year, new Chinese investment in Australia has dropped as China’s globalisation takes a different trajectory.”
“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.
“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.”
Despite a year-on-year decline of 51 percent, the commercial real estate sector was the second largest recipient of Chinese investment in 2019, accounting for A$1.5 billion.
Chinese investment in commercial real estate was mainly directed to smaller acquisitions in 2019. Just under 70 percent of the total number of transactions involved deal sizes of A$50 million or less.
Dr Wei Li from the University of Sydney Business School, fellow report author, said: “Chinese companies look to Australia for market know-how, standards and collaboration.
“For the third consecutive year, new Chinese investment in Australia has dropped as China’s globalisation takes a different trajectory and Australia’s engagement with China reverts back to primarily focus on trade relations.”