Australia clamouring for Chinese investment dollars
COMPETITION for Chinese investment is heating up, despite Australia remaining atop the pile for the eighth year running last year, a new study has revealed.
The KPMG-University of Sydney China Studies Centre released its latest research on out-bound investment flows from the huge economy on Friday.
It found while Australia experienced a 12% rise in Chinese investment, particularly in mining and gas, competition from the United States and Canada was threatening investment flows.
The billions of dollars coming out of China are also finding their way into new markets, with renewable energy and agricultural land two particular targets.
University of Sydney's Professor Hans Hendrischke said there was now no denying the rest of the world was hot on Australia's heels in pursuing the Chinese dollar.
Canada achieved top position for Chinese investment for the 2012 calendar year, due to the completion of one enormous transaction - the US$15.1 billion CNOOC-Nexen oil and gas company deal.
By the end of 2012, total accumulated investment reached US$51 billion in Australia, followed by US$50.7 billion in the USA and US$36.7 billion in Canada, with Brazil and Russia also major recipients.
Although short of the historic peak of US$16.2 billion in 2008, Chinese direct investment inflows into Australia in 2012 rose 21% from 2011 to reach US$11.4 billion in 27 transactions, up from US$9.4 billion in 2011 and US$3.7 billion in 2010.
"These numbers confirm that Australia is still a priority destination due to our vast supply of high quality natural resources, stable and reliable institutional systems and clean, green and fresh image for lifestyle," KPMG's head of China practice in Australia, Doug Ferguson said.
"While mining and resources still dominate investments, we're seeing greater diversification towards LNG, agribusiness, renewable wind energy and real estate."
Mr Ferguson also expected continued growth in areas including engineering and architecture, renewable energy, specialist environmental services and food safety and processing.
At home, Western Australia and Queensland were the big winners of Chinese investment, particularly on the back of mining and resources.
Notably, the proportion of investments by privately-owned Chinese companies rose during 2012, while the share of capital invested by Chinese state-owned enterprises fell during 2012.
Private Chinese investors completed 26% of all deals by number, and 13% by deal value, in contrast to historical trends of state-owned enterprises being behind 94% by value and 80% by number of deals between 2006 and 2011.
"We are starting to see the next wave of Chinese investment in Australia being made by privately owned companies and this trend will continue under the new investment visa program which opens the door for high net wealth Chinese investors," Mr Ferguson said.
"However, in view of the large size of deals in Australia, the dominance of SOEs is likely to continue as these companies dominate the energy, mining and infrastructure sectors at home in China and have strong central government support to invest abroad."
Chinese investment by industry:
- Mining: 48%Gas: 42%
- Renewable energy: 2%
- Other: 8%
Chinese investment by state (US dollars):
- WA: $6.3b
- QLD: $3.7b
- SA: $523m
- VIC: $444m
- TAS: $182m
- NSW: $117m
SOURCE: KPMG, Demystifying Chinese investment in Australia, 2013.