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How Much Investment Comes From China?

Garry Stephensen

Article Author: Garry Stephensen
Position: Managing Director
Read time: 7 mins

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New register tracks Chinese foreign investment in Australia and shows where the money ends up.

Chinese investment in Australian enterprises dropped by 40% last year, according to new figures!  This article looks at why this was and should we be alarmed.

 

China's decline in investment

 

Key points:

  • Between 2014 and 2017 Chinese investment totaled more than $40.4 billion

  • A quarter of the total money went to mining

  • Public administration and safety was the only sector to receive no money

 

The details are revealed in the first comprehensive public database tracking the flow of Chinese foreign investment into Australia, which outlines who spent the money and what they spent it on.

It shows that from 2014 to 2017, Chinese investment totaled more than $40.4 billion.

Investment was at its highest in 2016, at $14.9 billion, but dropped to $8.9 billion in 2017.

"It definitely peaked in 2016 and [came] back really quite a lot by 40 per cent in one year there and I guess looking at the data it will come back again this year," project leader Peter Drysdale, said.

He said there were a few reasons for the sudden decline.

"Either in terms of control in China or controls in Australia or the investment environment in Australia," Professor Drysdale said.

Researchers from the Australian National University compiled the database on Chinese investment in Australia by crosschecking figures from sources such as the Foreign Investment Review Board and the Australian Bureau of Statistics.

"Getting an accurate picture of what's going on is half the battle in having a sensible public discussion" Professor Drysdale said.

"The careful understanding of that is important to the development of a policy approach which will ensure all the risks associated with Chinese investment, from a public interest viewpoint, are covered."

Contact Lloyd's Business Brokers Melbourne for advice regarding international investment from China or USA in your business.

 

Where does China's money go?

Chinese Invest Data Graph

 

Part of the difficulty in tracking Chinese investment is that the investors are scattered. While many are in mainland China, others are based in Hong Kong or Australia.

The research team meticulously trawled through thousands of transactions to put together the full picture.

It showed most of China's money went towards mining and real estate. Mining accounted for a quarter of the total money received over the four-year period.

But it also showed a growing trend of Chinese investment being funnelled into services sectors, such as the health services industry.

 

 

The only sector to receive absolutely no money was public administration and safety

"So it's a more nuanced and mixed picture than we're used to" researcher Shiro Armstrong said.

And that should not be a surprise to Australians.  After all, Chinese investment in Australia is starting to mature, just as other sources of over overseas investment from the US or Japan had matured in the decades prior.

Chinese investment ..."starts to diversify across the sectors, across the economy."

Dr Armstrong said that brought new opportunities for Australian business.

"So whereas we used to dig up a lot of rocks and ship them to China, that will still be a big part of our economic relationship, but their investment is largely coming into tourism, the services sector, services links importantly" Dr Armstrong said.

Most of Chinese investment found its way to urban regions throughout Victoria and New South Wales.

Less than 10% of Chinese money went to Australian rural areas.  However researchers expect that the rural areas will see more growth in the future.

 

If you are concerned about the decline in Chinese investment, or would like to capitalize on investment opportunities, talk to Lloyds Business Brokers in Adelaide, Melbourne, Sydney and Brisbane.

 

How much investment comes from China?

Chinese Sector Data

 

The research databases also shed light on how much investment was backed by the Chinese Government, in comparison to private investment.

Within Australian sectors, there has long been concern regarding Chinese state-owned enterprises owning Australian farmland and business. But according to this study, the Chinese Government was involved in less than 20% of all investing.

"So what it's telling us really is that private investment from China is almost as important, just as important, as state-owned enterprise investment" Dr Armstrong said.

"A lot of small-scale investment is coming in as well as the big ticket headline projects."

Companies affiliated with the Communist Party of China were involved in larger deals, which meant that they contributed nearly half of the total dollars invested.

Professor Drysdale said it was hard to glean from a spreadsheet whether that translated into Chinese influence.

"Well, the data itself immediately doesn't tell us directly anything about that" he said.

"But what it makes possible is analysing those issues in a fact-based way, an evidence-based way."

Drysdale claimed that prior to this research, the debate surrounding Chinese investment had lacked those cold hard facts to support such claims.

"To put it frankly, the evidence, the information, hasn't been available to do the kind of analysis that's necessary to make the sort of claims that people have made about Chinese investment in Australia up to this point" he said.

The researchers are now pulling together the data for 2018.

Researchers expect their database will also be replicated in the future to look at the flow of money from the USA, Japan and other countries.

Courtesy ABC NEWS

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Future Trends and Predictions: Insights on Chinese Investment in Australia

Introduction

Chinese investment in Australia has experienced significant fluctuations over the past decade, influenced by both domestic and international factors. As we look ahead, understanding the future trends and predicting the trajectory of Chinese investment in Australia necessitates a comprehensive analysis of technological innovation, policy shifts, and economic conditions in both countries. This discussion will delve into these factors to provide a well-rounded perspective on what the future might hold.

Technological Innovation

1. Focus on High-Tech and Innovation Sectors

One of the most prominent trends we can expect is a shift in Chinese investment towards high-tech and innovation sectors. As China continues to move up the value chain in its economic development, Chinese firms are increasingly looking to invest in overseas technologies that can bolster their domestic capabilities. Australia, with its robust research institutions and advanced technological sectors, particularly in areas like biotechnology, renewable energy, artificial intelligence and information technology, is poised to attract significant Chinese investment.

2. Collaboration in Research and Development

Collaborative efforts between Chinese and Australian institutions in research and development (R&D) are likely to grow. These partnerships can foster innovation and lead to the commercialization of new technologies. For instance, joint ventures in the field of renewable energy could not only enhance technological capabilities but also contribute to both countries' sustainability goals. The emphasis on innovation ecosystems, such as tech hubs and incubators, will likely see increased funding and cooperation.

Policy Shifts

1. Stricter Regulatory Frameworks

In recent years, both Australia and China have implemented stricter regulatory frameworks governing foreign investment. Australia's Foreign Investment Review Board (FIRB) has become more vigilant in scrutinizing foreign investments, particularly those in sensitive sectors such as telecommunications, agriculture, and critical infrastructure. Moving forward, we can expect these regulations to become even more stringent, potentially slowing the flow of Chinese capital into certain sectors.

2. Bilateral Trade Agreements and Their Impact

The bilateral trade relationship between Australia and China is complex and subject to geopolitical dynamics. Trade agreements and diplomatic relations will play a crucial role in shaping future investment trends. Positive developments, such as the resolution of trade disputes and the signing of new agreements, could facilitate smoother investment flows. Conversely, tensions and trade barriers could lead to a decline in investment, particularly in strategic industries.

3. National Security Concerns

National security will remain a critical consideration in the regulation of Chinese investments. Australia's concerns about foreign influence and control over critical assets may result in more rigorous vetting processes and possibly restrictions on certain types of investments. Chinese investors may need to navigate these concerns by ensuring transparency and aligning their investments with Australia's national interests.

Economic Conditions

1. China's Economic Rebalancing

China's ongoing economic rebalancing, aimed at reducing dependence on exports and fostering domestic consumption, will influence its outbound investment strategies. As China focuses more on domestic growth and stability, its outward investment may prioritize sectors that can support this rebalancing, such as consumer goods, healthcare, and services. Australia's strong healthcare and education sectors could see increased Chinese investment as a result.

2. Australia's Economic Diversification

Australia's efforts to diversify its economy away from a heavy reliance on mining and towards sectors like services, technology, and renewable energy will shape future investment patterns. Chinese investors, looking to capitalize on these emerging opportunities, may channel more funds into these diversified sectors. For example, Australia's burgeoning renewable energy sector, with its abundant natural resources and technological expertise, is likely to attract significant Chinese investment.

3. Impact of Global Economic Trends

Global economic trends, such as changes in commodity prices, currency fluctuations, and shifts in global supply chains, will also affect Chinese investment in Australia. For instance, a downturn in global commodity prices might reduce investments in Australia's mining sector, while a rise in demand for renewable energy could boost investments in green technologies.

Emerging Sectors of Interest

1. Renewable Energy

Given the global push towards sustainability and carbon neutrality, renewable energy stands out as a key sector for future investment. Chinese companies, with their advanced capabilities in solar and wind energy, are likely to invest in Australia's renewable energy projects. This not only aligns with global environmental goals but also provides Chinese firms with opportunities to expand their market reach and technological expertise.

2. Healthcare and Biotechnology

The COVID-19 pandemic has underscored the importance of robust healthcare systems and innovative biotechnology. Australia's strong healthcare infrastructure and research in biotechnology make it an attractive destination for Chinese investment. Future investments might focus on pharmaceutical research, medical technologies, and healthcare services, driven by both market demand and the pursuit of joint advancements in medical science.

3. Education and Training

Australia is a preferred destination for Chinese students, and the education sector has seen significant Chinese investment. This trend is expected to continue, with investments not only in educational institutions but also in training programs, online education platforms, and vocational training centers. These investments can facilitate knowledge transfer and enhance educational ties between the two countries.

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The future of Chinese investment in Australia is poised to be shaped by a combination of technological innovation, policy shifts, and evolving economic conditions. As both countries navigate these dynamics, sectors such as high-tech, renewable energy, healthcare, and education are likely to see increased investment. However, regulatory frameworks and national security concerns will continue to influence the pace and nature of these investments. By fostering transparent and mutually beneficial partnerships, Australia and China can ensure that future investments contribute positively to their respective economies and bilateral relations.

 

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