PERTH (miningweekly.com) – New figures from advisory firm KPMG demonstrate that Chinese investment into Australia had declined by 36.3% in 2018, to A$8.2-billion, with mining investment decreasing over 90% compared with 2017 figures.
KPMG reported that the mining sector accounted for 5.6% of the total Chinese investment inflow with five mining deals totaling A$464-million in 2018, a decrease of over 90% from 2017.
Chinese mining investment in Australia returned to 2016 levels after a peak in 2017, owing to Yancoal’s A$3.4-billion acquisition of mining major Rio Tinto’s thermal coal assets.
In its ‘Demystifying Chinese Investment in Australia (April 2019)’ report, KPMG noted that private companies dominated the investment landscape, accounting for 87% of deal value and more than 92% of deal volume, with an overall trend towards smaller-sized deals.
Healthcare was the most popular sector for Chinese investors, with commercial real estate falling to second position.
The report noted that while Chinese investors still saw Australia as a relatively attractive country to invest in, with an improving political climate, they also confirmed that they were finding it harder to get capital out of China, and there were challenges raising capital in Australia.
“Despite Chinese global outbound direct investment actually growing by 4.2% in 2018, Australia has felt the pinch of a significant reduction to our shores, reflecting the impact of policy changes in China. Our rate of decline has been accelerating and is now closer to the trend observed in the US and Canada, where Chinese overseas direct investment (ODI) dropped by 83% and 47% respectively in 2018,” said report co-author and head of Asia and international markets for KPMG Australia, Doug Ferguson.
“While this annual result brings Chinese ODI in Australia back to the second-lowest level since the mining and gas driven investment peak year of 2008, there is no reason why Australia can’t return to higher levels of Chinese capital inflow seen historically.”
Fellow author Hans Hendrischke, Professor of Chinese Business and Management at the University of Sydney Business School, noted that the continued reduction in Chinese investment in Australia reflected a combination of factors, including changing drivers of Chinese ODI, such as an increased demand for outbound investment in high value-added sectors to ‘bring back’ expertise and high-quality brands and products that could support China’s industrial upgrading and meet the evolving demands of Chinese middle class consumers.
“As part of this trend, large strategic investments in resources, energy and infrastructure have given way to smaller investments, into projects that are tactical and directly linked to Chinese consumer market demand. This is particularly evident in the targeting of the Australian healthcare sector by Chinese investors.”
Ferguson, meanwhile, said that 2018 did not need to define a trend of lower Chinese investment in Australia into the future, but was a moment to reflect upon.
“There are a great many opportunities for Chinese companies to contribute towards the development and internationalisation of Australian industries in the coming years. Australian companies seeking further investment must continue to explore and present unique opportunities that appeal to the key value drivers of targeted Chinese investors,” Ferguson said.