Agriculture, real estate, infrastructure & energy – staples of maturing Chinese investment in Australia

Doug Ferguson, Partner in Charge, Asia and International Markets
Doug Ferguson, Partner in Charge, Asia and International Markets
US$11.49 billion (AU$15.36 billion) – the highest level since its 2008 peak. And this result occurred in spite of uncertainties surrounding Australia’s foreign investment review regime.

Chinese investors signed a record number of deals with many repeat investments from established companies. The diversification of investments across different industries and geographies saw a growing focus on infrastructure, energy and agribusiness. In fact, infrastructure and agribusiness attracted record investment.

Investment in the energy sector surpassed mining for the first time, while commercial real estate remained the most dominant industry for Chinese investors. Tasmania experienced a record AU$ 280 million investment in agribusiness reinforcing China’s desire for safe, reliable food sources.

The year saw controversy surrounding the Ausgrid and S Kidman & Co deals. Both proposed investments were rejected by the Treasurer on the grounds of national interest and specifically, national security. Whilst the shareholding structure of the Kidman deal was later modified and approved as an Australia-China joint venture, the Chinese Ausgrid bid stalled following the Treasurer’s announcement.

These investments foreshadow changes in the approval processes under the Government’s Foreign Policy White Paper, with stronger consideration of security interests to be given to large infrastructure projects in sectors where China is building up regional and global capacities.

For China, the 13th Five Year Plan (FYP) provides a framework for the design and implementation of policies to guide and facilitate their transition from an investment-intensive, export-led growth model to one driven by consumption and innovation. This will help drive ongoing investment by Chinese companies in Australia, while presenting partnership and development opportunities for Australian businesses across multiple industries.

Recent comments by visiting Chinese Premier Li Keqiang also reassure us that Australia remains on good terms and is a strategically important partner for China.

Australia has proven itself to be a preferred destination for Chinese capital. On the international stage, Australia maintains its position as the second largest recipient of aggregated Chinese direct investment, attracting around US$90 billion since 2007 – behind the United States, which has received more than $100 billion of investment in the same period.

But the growth in investment is slowing compared to other parts of the world such as the United States and the EU. Going forward, efforts by the Chinese Government to increase oversight and accountability for overseas investments as well as geopolitical factors are expected to have an impact on investment flows globally.

Australia has a strategic opportunity to grow and diversify an already strong economic partnership through deeper cooperation with China. Clarity will be key for any new investment regulation that emerges from Australia’s upcoming Foreign Policy White Paper.

Specific and transparent policy guidance will encourage investment and ensure partnerships between foreign and local companies continue to drive co-operation with Chinese investors.

Demystifying Chinese Investment in Australia, May 2017

Add Comment