Demystifying Chinese Investment in Australia: June 2018 | KPMG | AU

Demystifying Chinese Investment in Australia: June 2018

Demystifying Chinese Investment in Australia: June 2018

Australia remains a major recipient of Chinese direct investment with accumulated Chinese ODI of USD 99 billion over the last decade since 2008.

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Renewed investment in mining, continued investment in commercial real estate1 and a surge in healthcare investment helped drive overall Chinese investment in Australia to USD 10.3 billion (AUD 13.3 billion) in 2017 – although down 11 percent (in USD terms) from 2016. Changing regulatory, political and economic landscapes impacted new investment flows from China to the world during the year, with global Chinese overseas direct investment falling by 29 percent.

Australia has done relatively well by concentrating on its specific competitive advantages. The nature of Chinese investment in Australia continues to change and diversify, creating new opportunities. Sectors that complement the strengthening of the Chinese economy such a mining, property, healthcare, renewable energy, food and agribusiness have been very active in 2017.

This June 2018 report is the latest in a series of Demystifying Chinese Investment in Australia reports, by KPMG and The University of Sydney Business School. It analyses Chinese outbound direct investment into Australia in the 2017 calendar year and includes a specialist contribution from JLL providing data and analysis on real estate transactions in the 2017 calendar year. The report also incorporates the latest Chinese Investors in Australia Survey.

Key findings

  • Chinese investment in Australia declined by 11 percent in 2017, from USD 11.5 billion (AUD 15.4 billion) to USD 10.3 billion (AUD 13.3 billion).
  • This annual rate of decline in new investment is less than the United States (down 35 percent), EU (down 17 percent) and roughly on par with Canada (down 9 percent).
  • Chinese global ODI fell 29 percent in 2017 off historic 2016 levels due to tightened Chinese capital outflow and deal approval regulations.
  • Australia remains the second largest recipient country of accumulated Chinese investment, after the US, with USD 99 billion since 2008. The gap between Australia and the US has grown considerably in recent years with the US accumulating USD 138 billion in Chinese investment since 2008.
  • There were 102 deals in 2017, roughly the same as 2016, but average deal sizes fell with 76 percent below AUD 100 million.
  • Mining returned to being the largest sector for Chinese investment in 2017 with AUD 4.6 billion. Total mining investment increased nearly five-fold from 2016, driven primarily by a USD 2.7 billion (AUD 3.4 billion) coal mining deal.
  • Commercial real estate remained the second most attractive sector for Chinese investment with AUD 4.4 billion, representing 33 percent of 2017 Chinese ODI but also an annual fall of 22 percent.
  • Investment in the Healthcare sector surged 20 percent to AUD 1.6 billion.2
  • Food and agribusiness investment fell 8 percent but remained above AUD 1.0 billion, driven by one major deal in the animal food products sector.
  • NSW continued to attract the most investment with 42 percent of the total followed by Victoria (36 percent) and WA (14 percent).
  • The total volume and value of State Owned Enterprises (SOE) investment dropped for the first time since 2014.
  • Private Chinese company investment grew to 83 percent of total deal volume and 60 percent of deal value in 2017.
  • Our biennial Chinese Investors in Australia Survey captures a mood of cautious optimism as well as apprehension at the current state of diplomatic relations between Australia and China and negative media coverage in Australia.

Outlook

Australia’s relationship with China, while experiencing a period of heightened tension, is mature and deeply established in trade and investment and increasingly in society and culture through education, tourism and migration.

It is important that the Australian Government and business community collaborate to encourage further investment in the right areas. Australia stands to make sustained economic, social and diplomatic gains by nurturing long-term partnerships between Australian companies and Chinese investors.

Visual report summary

Snapshot of the Demystifying Chinese Investment in Australia: June 2018 report

Footnote

1. Note 'real estate’ referred to in this report does NOT include residential apartment and homes sales.
2. Demystifying Chinese Investment in Australian Healthcare

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