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Chinese investment in Australia decreased by 36% in 2018, from A $ 13 billion (US $ 10 billion) in 2017 to A $ 8.2 billion (US $ 6.2 billion) in 2017, according to a study conducted by KPMG and the Business School of the University of Sydney.
This is despite Chinese investors who still believe that Australia is safer and more attractive than most other countries. So, 2018 does not have to be a turning point. But it is a subject of reflection.
KPMG Database / University of Sydney, Author provided (no reuse)
Discussions over Chinese investments in recent years have been dominated by political and security concerns. These concerns must be balanced by the national interest for economic prosperity. Chinese investments create jobs, increase export opportunities and deepen relations with our main trading partner.
It may be argued that the pendulum must return to reflection on the economic benefits. We need a more balanced national conversation.
Many losers, a winner
Our data covers direct investments resulting from mergers and acquisitions, joint ventures and new projects. We do not include portfolio investments, such as the purchase of shares and bonds, that do not give rise to foreign management, property or legal control. We do not include sales of residential properties either.
In the mining, agri-food and services sectors, investments fell by more than 90%. In renewable energy, it decreased by 48% and in commercial real estate by 31%.
The only sector where investments have not declined is health care, where it has more than doubled to $ 3.4 billion. This made the health sector the main investment sector, attracting 41.7% of total Chinese money, relegating commercial real estate (36.7%) to second place.
The KPMG database / University of Sydney, Author provided (no reuse)
The declines were caused by the reduction of foreign investment by state-owned enterprises. In 2018, 13% of the Chinese currency came from state-owned enterprises, 87% of which were from private companies.
This reflects the Chinese government's increased control over capital outflows and pressure to reduce the level of debt, as well as the Australian government's security concerns over China's influence.
It also reflects the global dynamic. Chinese investments in Australia are no longer isolated from the control of Chinese investments in North America and Europe. The exclusion of Chinese technology from telecommunications infrastructure is a notable example.
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In the United States, Chinese investment declined by 83%, from US $ 29 billion in 2017 to US $ 4.8 billion. In Canada, they fell 47% to 3.4 billion US dollars, against 6.2 billion US dollars in 2017.
KPMG and University of Sydney, Author provided (no reuse)
Balancing competing concerns
Australian governments, business and professional advisors need to determine what types of Chinese investments and investors are desired and actively hosted in Australia.
Our report highlights the areas in which Chinese investments are in Australia's national interest and promote the global integration and competitiveness of Australian industries.
Health care is a key example.
The KPMG database / University of Sydney, Author provided (no reuse)
Chinese investments in health care enterprises have both provided capital for innovation and facilitated entry into the Chinese market.
Take the Chinese private equity firm CDH that buys Sirtex Medical Ltd for $ 1.9 billion. Sirtex is an Australian medical device company offering treatment for liver cancer. Its acquisition allows for expansion in China, which accounts for more than half of the global incidence of liver cancer.
In the mining sector, lithium provides an example of Chinese investment bringing added value. Tianqi Lithium has invested 700 million Australian dollars in a processing plant in Perth. The plant will generate about 200 jobs and will produce 48,000 tons of battery grade lithium hydroxide for export.
Even in the food and agriculture sectors, which have been the subject of much controversy over land acquisition, we believe that it would be wise to transform investments and provide added value, such as regional slaughterhouses.
Asserting Australia's economic interests in Chinese and foreign investments is essential to Australia's prosperity.
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At a time of global uncertainty, politicians, bureaucrats, business leaders, educational organizations and other Australian organizations must work calmly and respectfully with their Chinese counterparts to alleviate community concerns. and consolidate Australia's reputation as a welcoming and proactive partner.
The authors contributed to the report entitled Demystifying Chinese Investment in Australia.
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