This article is from the Australian Property Journal archive
CHINESE investors’ interest in Australia is stronger than ever and they are diversifying their investments into new sectors, according to a report by KPMG and The University of Sydney.
According to the latest Demystifying Chinese Investment in Australia report by KPMG Australia and The University of Sydney, mega deals have re-emerged in 2015 with seven investments of $AU500 million or more during the year, which helped boost the total value of investment to US$11.1 billion ($AU15.09 billion), a 32.9% increase on the previous year in US$ terms (or a 59.5% increase in $AU).
This was the second highest inflow year for new Chinese investment into Australia, behind the previous peak driven by mining sector investment in 2008.
Globally, Australia maintained its position as the second largest recipient of aggregated Chinese direct investment between 2005 and 2015, behind the United States, attracting a cumulative US$78.7 billion during the period.
KPMG Australia’s head of Asia and international markets Doug Ferguson said following two years of moderately declining Chinese investment, the resurgence of interest and the diversification by Chinese companies in 2015 is a strong endorsement of the attractiveness of Australia’s economy.
“Alongside continued interest in the New South Wales and Victorian commercial real estate sectors, there has been activity and major deals in renewables, agribusiness, and for the first time, healthcare.
“Overall we are seeing a strong story of Chinese investment into Australia’s broader economy which is in line with premium products, services and lifestyle-oriented themes,” he said.
The commercial real estate remained dominant for the second year in a row, accounting for 45% of the total deal volume.
There was also significant investment into renewable energy and healthcare, and long-awaited growth in agriculture and agribusiness investment.
Chinese direct investment continues to be focussed on commercial real estate (45%) growing to $AU6.85 billion from $AU4.37 billion in 2014.
Although the report noted a strong focus on new areas such as renewable energy (20%) and for the first time, material investment in the healthcare sector (17%). Mining fell to 9% (down from 11% the previous year), with energy (oil and gas) at 3%. Investment in agribusiness attracted a new high of 3%.
According to the report, 2015 was the first year to see substantial growth in Chinese investment in agribusiness, with $AU375 million spread across 12 deals in sectors including dairy, beef and cotton.
The year also saw a lowering of the Foreign Investment Review Board limits for mandatory approval for agricultural land acquisition and the rejection of an application from a Chinese investor to purchase S Kidman & Co – illustrating the sensitive and very public debate over investment in this sector. Nonetheless, Chinese investors are expected to remain strongly interested in Australian agribusiness.
Chinese investors also moved into new geographies, with the Northern Territory receiving over $AU565 million of investment for the first time. NSW remains the top destination for investment, attracting 49.3% of the national total.
The University of Sydney business school Chinese business & management Professor Hans Hendrischke said their research also showed that, for Chinese companies looking to expand internationally, Australia is seen as a strong first port of call, allowing them to gain experience and management know-how before taking on other overseas markets.
“Australia is seen as a learning ground for entering other developed markets. The closer economic relationship between China and Australia has helped, as does the time zone compatibility between our countries. The sense that Australia is a preferred destination for Chinese students, tourists and migrants also provides us with a competitive advantage,” Professor Hendrischke said.
Overall, Chinese investors remain bullish on Australia, with 65% saying their three-year outlook is positive, and 55% planning to increase their Australian holdings in 2016.
“As China embarks upon its next Five Year Plan and continues to develop as a leading global economy, Australia is poised to profit as one of its major trading partners.
“All Chinese investors we interviewed held a highly positive medium-long term view of Australia and are looking to increase their investments in Australia,” he continued.
“With China’s global ODI expected to continue to grow by over 10% each year – driven by Chinese companies’ desire to acquire experience, tech and human capital as the countries consumption trends evolve – agriculture and food, high-end manufacturing and real estate will continue to attract investment. ICT, healthcare and transportation will be the new ‘hot’ sectors to watch,” Hendrischke said.
Australian Property Journal
