A new report revealed a loss of interest in Australia as Chinese investments fell by 36.3 percent or $8.2 billion in 2018. Conducted by KPMG and the University of Sydney Business School, the report titled “Demystifying Chinese Investment in Australia” found these investors are having difficulty in bringing money out of their country, the University of Sydney media reported.
Professor Hans Hendrischke of the University of Sydney Business School, who is also the co-author of this report, called the decline as a “significant withdrawal” specifically that of the Chinese State-Owned Enterprises (SOEs).
Two of the most popular sectors of these investors is healthcare coming in the first place while commercial real estate comes next. Despite the drawback, Chinese investors still see Australia as “relatively attractive country in which to invest.”
The professor cited two reasons behind the decline. First, which he sees as the main reason, is global insecurity about Chinese investment, while another reason is the recent political tensions between Canberra and Beijing.
“Despite Chinese global outbound direct investment actually growing by 4.2 percent in 2018, Australia has felt the pinch of a significant reduction, reflecting the impact of policy changes in China,” Doug Ferguson, Head of Asia & International Markets for KPMG Australia and co-author of the report, told the University of Sydney media.
“Our rate of decline has been accelerating and is now closer to the trend observed in the United States and Canada, where Chinese Overseas Direct Investment (ODI) dropped by 83 percent and 47 percent respectively in 2018.”
“While this annual result brings Chinese ODI in Australia back to the second lowest level since the mining and gas driven investment peak year of 2008, there is no reason why Australia can’t return to higher levels of Chinese capital inflow seen historically,” Mr Ferguson told the University of Sydney media.
Professor Hendrischke said the decline is influenced by different factors, such as Chinese capital controls, security concerns about Chinese investments in the country, and even diplomatic relations, the University of Sydney media reports.
“Large strategic investments in resources, energy and infrastructure have given way to smaller investments,” Professor Hendrischke said. “strong dominance of private investors reflects a desire amongst Chinese ODI to invest in high value-added sectors able to ‘bring back’ expertise and high-quality brands and products that can support China’s industrial upgrading and meet the evolving demands of Chinese middle class consumers”.
“As part of this trend, large strategic investments in resources, energy and infrastructure have given way to smaller investments and in projects that are tactical and directly linked to Chinese consumer market demand,” Professor Hendrischke said. “This is particularly evident in the targeting of the Australian healthcare sector by Chinese investors,” the professor added.
Private Chinese companies are known to be the largest contributors in the investment landscape of Australia in 2018, accounting for 87 per cent of deal value and more than 92 per cent of deal volume as well as creating a trend of smaller sized deals.
“2018 need not define a trend of lower Chinese investment in Australia into the future but it is a moment to reflect upon,” Mr Ferguson told the University of Sydney media. “There are a great many opportunities for Chinese companies to contribute towards the development and internationalisation of Australian industries in the coming years.”
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