Seismic shifts in focus of Chinese investment in Australia

SYDNEY - Dramatic structural changes drove strong shifts in the sector, number and types of deals being made by Chinese investors in Australia during 2014, according to a just released report by KPMG Australia, the University of Sydney Business School and China Studies Centre.

For the first time nearly half of all Chinese investment was concentrated in commercial real estate transactions, with investment in infrastructure increasing significantly. Also for the first time, Chinese private sector investment exceeded State-owned enterprise investment, both in terms of volume and value.

New South Wales attracted 72 per cent of all Chinese investment, with seven of the eight largest completed deals in 2014 NSW-domiciled.

In 2014, China became a global net foreign investor for the first time, with total outbound direct investment volume rising by around 11% to US$120 billion.

Australia maintained its standing as the second-largest recipient country of aggregated global Chinese direct investment, behind the United States, but for a second consecutive year, Chinese investment in Australia actually declined, the report says.

Overall, Chinese investment in Australia fell 9.1% in the 2014 calendar year, from US$9.19 billion to US$8.35 billion. The major reason for the decline was a downward trend in new mining and energy sector investment.

“In our 2013 annual update report, we observed that Chinese direct investment in Australia had reached a turning point away from resources towards the real estate, infrastructure, and consumer sectors. This trend continued in 2014,” said Hans Hendrischke, Professor of Chinese Business & Management at the University of Sydney Business School.

“Under this ‘new normal’ scenario, Chinese companies are expected to continue to invest over US$ 90 billion into Australia in the next decade.”

He said the key investment areas for China in Australia would be energy, infrastructure, real estate, leisure and tourism, technology, services, and food and agribusiness.

In 2014, Chinese direct investment in Australia was mainly focussed on commercial real estate (46%, up from 14% in 2013), infrastructure (21%) and for the first time, a material investment in the tourism and leisure sectors (12%). Mining represented 11% of investment (down from 24% the previous year), with energy at 7%. Manufacturing and agribusiness remained flat, attracting 2% and 1% respectively.  http://sydney.edu.au/business (ATI).