Chinese target seven key sectors in Australia

UNDER a ‘new normal’ scenario, Chinese companies are expected to invest more than US$9 billion in Australia over the next decade . . . 

DRAMATIC structural changes drove strong shifts in the sector, number and types of deals being made by Chinese investors in Australia during 2014.

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

New South Wales attracted 72 per cent of total Chinese investment, with seven of the eight largest completed deals in 2014 NSW domiciled. These are among the key findings of Demystifying Chinese Investment in Australia, a report by KPMG Australia, the University of Sydney Business School and the China Studies Centre. While Australia maintained its standing as the second-largest recipient country of aggre gated global Chinese direct investment (behind the United States), total Chinese investment in Australia actually declined for a second con- secutive year, falling by 9.1 per cent from US$9.19 billion to US$8.35 billion.

The major reason for the decline, the report says, was a downward trend in new mining and energy sector investment.

“It is not surprising to see that Chinese companies’ investment destinations are chang- ing, from resource-rich developing countries to developed countries providing access to advanced technologies, established brands, extensive industry experience and worldwide distribution networks,” says report co-author, Doug Ferguson, Head of KPMG Australia’s Asia Business Group.

But, he adds: “While the trend away from resources has led to a decline in Chinese investment in Australia, the trend towards real estate, leisure, advanced technologies, food and services works in Australia’s favour for the longer term.”

The report points to a number of significant positives and opportunities in what the authors describe as a ‘new normal’ of Chinese out- bound direct investment in Australia – diversi- fication into new sectors including real estate, infrastructure, leisure and tourism and food, led by Chinese private sector companies.

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

“Under this ‘new normal’ scenario, Chinese companies are expected to continue to invest more than US$90 billion into Australia over the next decade.” Hendrischke says the key invest- ment areas will be energy, infrastructure, real estate, leisure and tourism, technology, servic- es, and food and agribusiness.