Australia is maintaining its attraction for Chinese investors, whose business interests are rapidly diversifying and are increasingly being led by private companies — but its competitors in North America and Europe are fast catching up.
The 12th annual review of Chinese investment by KPMG with Sydney University and Knight Frank, released today, says it totalled $15.4 billion in 2016, the highest since 2008 — despite the controversial federal government vetoes on large Chinese bids for NSW’s Ausgrid and the S. Kidman property empire.
Doug Ferguson, head of Asia and international markets at KMG Australia, said these deals had provided a valuable learning experience, with Shanghai CRED reworking its plan for S. Kidman and taking a minority stake alongside Gina Rinehart, possibly providing a blueprint for other Chinese companies for large-scale agribusiness investments.
He said: “No one has picked up their bat and ball and gone home, that’s for sure.”
Australia remains second only to the US, the biggest overall recipient of direct Chinese investment since 2007, worth $120bn. Investment in Australia has in recent years kept climbing from $11.15bn in 2014 and $13.5bn in 2015.
Commercial real estate, 36 per cent of all deals, was the main target in 2016, but residential developments, 51 per cent of Chinese property involvements in Australia last year, have superseded office investment as the largest focus.
New housing was being built by Chinese developers in outer suburbs, Mr Ferguson said. “While some Chinese individuals have been driving up home values, those developers are adding supply, taking some of the inflation out of the market.”
Infrastructure — pushed up by the China Investment Corporation-led $2.4bn investment in Asciano’s rail assets, and the same company’s 20 per cent, $1.9bn stake in the privatisation of Melbourne Port — accounted for 28 per cent, worth $4.3bn, healthcare deals $1.35bn, agribusiness $1.2bn, energy $1.15bn, and mining, which was in former years dominant, $839m.
The growth in Chinese tourism, with 1.2 million visitors in 2016, as well as the strong numbers of Chinese students in Australia, have driven related hospitality investment, with $1.7bn of hotel assets bought over the past two years.
Agribusiness spending tripled last year from 2015, with a focus on the dairy, meat, seafood and wine sectors.
More than half of Chinese investment, 53 per cent, went to NSW, followed by Victoria with 25 per cent. Chinese companies that are privately owned — as far as the report’s authors were able to discern — signed 78 deals, 76 per cent of the total number, worth $7.6bn, nearly half the overall value of Chinese investments.
Mr Ferguson said that while Australia had a big year in 2016 for Chinese investment, the US and Europe had had much bigger years. But the pattern of business behaviour in Australia has become more settled — with Chinese investors crucially beginning to focus on the importance of obtaining a social licence in order to operate successfully, he said.
One of Australia’s leading experts on Chinese business, Alistair Nicholas of Powell Tate Australia, wrote in the new report that “investors needed to demonstrate a commitment to Australian society that goes beyond earning profits in order to succeed, even where an investment is providing an economic benefit to the nation”.
Although “poorly conceived and executed” investment approaches by Chinese firms may be comparatively few in Australia, he said, “their examples echo loudly around the country, and are dredged up by opponents when a new investment proposition is put forward”.
He cited the example of a Chinese dairy group that bought five farms in Gippsland in Victoria. It assumed, he said, that federal and state government approvals for its initial investment were sufficient to expand aggressively. It appeared “a fearful juggernaut” and found few local supporters.
In contrast, the investments of Shandong RuYi in Cubbie Station and of New Hope Group in a number of rural properties provided examples of successful approaches in obtaining a social licence.
Mr Nicholas said it was important Chinese investors understood that no government authority granted such a licence, that it involved “acceptance” by the community where an investment is made.
Rowan Callick in Beijing