The Chinese investment profile is changing. For the first time in 2013 Chinese investment in Australia was not concentrated in the mining sector. We experienced a shift towards a larger number of smaller to medium sized deals and a larger share of private Chinese investors. But this did not make up the gap in mining investment.
Australia narrowly lost its mantle in 2013 as the world’s top destination for Chinese outbound direct investment (ODI)1
. In an increasingly competitive international market for attracting Chinese capital, Australia’s ranking for accumulated global ODI dropped to second position behind the USA, as did our competitive ranking for the 2013 calendar year, again in favour of the USA. Australia now ranks behind the USA but ahead of Canada, Brazil and Britain2
In 2012, Australia and the USA were on par – each with 12 percent of China's annual global ODI volume. In 2013, the USA attracted 17 percent while Australia attracted 8 percent of China’s annual total ODI.
"The Chinese investment profile is changing. While Australia is well placed to remain a priority destination, we can't afford to rest on our laurels."
National Leader, Asia Business Group
Australia has more work to do to continue to attract Chinese investment from an increasingly competitive global market. The 10 percent investment value fall from 2012 should serve as a warning that Chinese investment remains volatile.
Key policy settings such as FIRB, FTA, migration and general policies to reduce Australian domestic operating costs, increase productivity and the speed of project approvals must be delivered and implemented.
Two very large deals – China State Grid's acquisition of 19.9 percent of the publicly listed SP AusNet and 60 percent of the privately held Jemena business from Singapore Power and CNOOC’s US$ 1,930 million investment in BG Group’s Queensland Curtis Island LNG deal accounted for 63 percent of total Chinese ODI in Australia in 2013. The balance is comprised of a larger number of relatively lower value deals. Overall, the power distribution industry dominated with 40 percent of the total investment value in 2013, followed by mining (24 percent), gas (21 percent), commercial real estate (14 percent) and agribusiness (1 percent).
In 2013 there was a noticeable uplift of investment in the commercial real estate sector with a surprisingly large number of deals – 20 – amounting to a total value of US$ 1,290 million. Meanwhile the downward trend in new mining investment continued, from US$ 5,693 million in 2012 to US$ 2,133 million in 2013.
While State Owned Enterprise (SOE) investment continued to dominate 2013 investment by value (84 percent) due to the State Grid and CNOOC investments, privately owned Chinese companies have increased their investment activity in terms of number of deals (63 percent), particularly in commercial real estate.
As a result of the State Grid’s acquisition, Victoria for the first time stands out as the top state destination for Chinese direct investment in Australia, attracting nearly half of 2013 Chinese investment. New South Wales attracted more investment compared to 2012, mainly due to an increased volume in commercial real estate investment. Western Australia lost its dominant position, capturing much less Chinese capital than usual as a result of the slow down in new mining investment.
We remain positive about the future. China's Premier recently stating that the Free Trade Agreement with Australia will be accelerated, and that Chinese companies will invest over US$ 500 billion internationally over the next five years are very strong indicators of trade and investment growth.
Australia has traditionally received around 12 percent of this share of spending so the size of the prize is very significant.
1 Based on Heritage Foundation figures for accumulated Chinese investment, 2005-2013; and also year-on-year figures for Chinese investment in Australia 2012 versus 2013 from KPMG/University of Sydney database analysis.
Chinese Investment Tracker 2014, Dataset 1