Chinese investment in Australia falls as political debate hits confidence

  • Written by Hans Hendrischke, Professor of Chinese Business and Management, University of Sydney

Chinese direct investment in Australia has declined, according to a new report by the University of Sydney and KPMG. In 2017, the value of investment fell by 11% in US dollar terms, from $11.5 billion in 2016 (A$15.4 billion) to $10.3 billion (A$13.3 billion).

In early 2018, we also surveyed nearly 50 Chinese executives in Australia. The responses show Chinese investors are feeling apprehensive and reluctant to engage in a climate of insecurity created by current debate about China’s role in Australia.

Read more: When it comes to China's influence on Australia, beware of sweeping statements and conflated ideas

The investment drop occurred in nearly all areas of Chinese investment in Australia, including:

  • commercial real estate, where investment was down 22%
  • infrastructure (-89%)
  • food and agribusiness (-8%)
  • renewable energy (-64%)
  • oil and gas (-84%).

Growth occurred in mining and energy, with a 448% increase in investment, health care (20%), transport (2%) and smaller areas such as services and manufacture (38%).

The decline in Chinese investment does not come as a surprise. Chinese outbound investment in all countries was down 29% in 2017. Chinese investment in the United States fell by 35% and in the European Union by 17% after large increases in 2016.

Some of this is a result of actions by Chinese regulators since late 2016. They have targeted speculative “irrational” investment and capital flight, grouped outbound investment into three categories – prohibited, restricted and encouraged – and directly intervened in some high-profile international transactions. However, the new regulations and the curb on speculative investments only marginally affect Australia.

Read more: Why China is cracking down on overseas investment

The more important news is Australia did not pick up increased Chinese investment in the encouraged industries, namely services, agriculture and infrastructure. These are areas where Australia has strong competitive advantages and is highly complementary to Chinese economic interests.

Combined Chinese investment in Australia’s agribusiness, infrastructure, renewable energy and services halved in 2017. Commercial real estate, the second-largest area behind mining in 2017, has fallen two years in a row.

The only two growth areas in the encouraged category were mining and health care. Lithium mining and Yancoal’s A$3.4 billion acquisition of Rio Tinto’s thermal coal assets boosted mining investment. Health-care investment rose by 20% with several large investments in health service providers and supplements.

Two structural trends have underpinned the decline in investment volume. First, private investors with smaller investment volumes are crowding out larger investments by state-owned enterprises. Second, investment by new entrants is declining in favour of repeat investors.

The report adds fuel to the debate about the Australian government’s political stance towards China and its impact on economic relations. If the intent was to slow down Chinese investment in Australia, this has been achieved.

Feeling less welcome

In our survey, more than half of our respondents either agreed (48%) or strongly agreed (4%) that they felt less welcome in Australia, compared to just over one-third (35%) of respondents in 2014.

Asked about the level of support from major stakeholders, Australian media received the lowest rating overall. Business leaders were seen as the most supportive group. State governments and local councils were also given positive ratings.

Local communities were seen as less supportive, ahead of the federal government. The Foreign Investment Review Board (FIRB) received the lowest government rating.

Read more: Sydneysiders blame foreign investors for high housing prices – survey

Two-thirds (67%) of respondents strongly agreed (17%) or agreed (50%) agreed that the federal government was less supportive of Chinese investment than previously. A slightly higher number (70%) stated that the political debate about China had made their company more cautious about investing in Australia.

Half of the respondents (52%) felt that Australia was a safer place to invest than many other countries, down from 63% in 2014. The majority view was in spite of problems such as higher business costs than in the United Kingdom, United States and Canada, difficulties in finding qualified staff, and communication issues with local staff and management.

The Chinese investors’ evaluation of business success over the past three years and the outlook for the year ahead confirms their overall positive attitude towards Australia. Growth in turnover and profitability was reported by 65% percent and 45% of respondents respectively.

For 2018, a similar number of respondents expect growth in turnover (64%) and profitability (42%). Half of the respondents (49%) expressed optimism about business prospects for the year ahead.

Politics plays into business

Personal interviews with a smaller number of local Chinese companies confirmed the prevailing feelings of insecurity and apprehension. Chinese investors discuss the political situation among each other and with head offices in China, which are concerned about negative reporting.

In the absence of positive signals from the federal government, larger investments by state-owned enterprises – in infrastructure building, for example – are unlikely to go ahead.

The report highlights the potential business implications of trying to separate business from politics in the relationship with China. Business co-operation between Australia and China is strategic rather than purely transactional. This means bilateral diplomatic relations have an important signalling function for long-term and large-scale investments.

Australia needs to build up supply chains and infrastructure to maintain its competitive advantage and to increase capacities in growing export industries such as agriculture and services. This in turn requires substantial investments.

So far, state governments and business are seen as supportive, but a more predictable diplomatic environment is indispensable for securing long-term strategic investment.

Authors: Hans Hendrischke, Professor of Chinese Business and Management, University of Sydney

Read more http://theconversation.com/chinese-investment-in-australia-falls-as-political-debate-hits-confidence-98144

Australia Today

What sea creature can attack and win over a blue whale?

Wally Franklin, Researcher and co-director of the The Oceania Project, Southern Cross University

Blue whales are the largest creatures to have ever lived on Earth.ShutterstockThis is an article from Curious Kids, a series for children. The Conversation is asking kids to send in questions they’d like an expert to answer. All questions are welcome – serious, weird or wacky! You might ...

Read more

how leadership instability and revenge became woven into our political fabric

Frank Bongiorno, Professor of History, ANU College of Arts and Social Sciences, Australian National University

Wes Mountain/The Conversation, CC BY-NDBack in 2012, a major study on the selection and removal of party leaders in Anglo parliamentary democracies was published. The book contained a section with the inviting title of “Machiavellian tactics”. Most of the authors’ examples came fro...

Read more

How to move energy policy models beyond bias and vested interests

Shirin Malekpour, Research Leader in Strategic Planning and Futures Studies, Monash Sustainable Development Institute, Monash University

Modelling should be a chance to test your assumptions, not just confirm them.ShutterstockThe Turnbull government’s flagship energy plan, the National Energy Guarantee, was intended to end a decade-long stalemate on energy and climate policy in Australia. Ironically, since its unveiling in Octo...

Read more

University staff and students are at high risk of ill health. Here's how to make sure they can cope

Brad Wright, Sessional Academic (Health & Physical Education), Charles Sturt University

Students and staff at universities have many of the same health risk factors, including poor mental health and alcohol consumption.www.shutterstock.comUniversity students are an at-risk population for many health issues. These include mental health, alcohol and substance use, sexual assault and hara...

Read more

What do your earliest childhood memories say about you?

Penny Van Bergen, Senior Lecturer in Educational Psychology, Macquarie University

The experience "this happened to me" is stronger than "this happened" in memory formation. epicharmus/flickr , CC BY-SAWe experience thousands of events across childhood, and yet as adults we recall only a handful. Some might be “firsts” (our first ice cream, our first day at school), or...

Read more

what is loss aversion and is it real?

Brendan Markey-Towler, Researcher, The University of Queensland

You may still feel losing a wallet more than finding it.ShutterstockA recent study claims a core idea in behavioural economics – loss aversion – is a fallacy. Loss aversion is the theory that the pain of losing something is greater than the pleasure we feel by gaining something equivalen...

Read more

Holidays & Travel

Guide to Travel Necessities for 2018

Sure, it sounds like quite an adventure to hit an open road with nothing but a one-way ticket and an open mind, but the harsh reality is – you won’t...

Top Sightseeing Spots in New Zealand

New Zealand is one of the most fascinating locations for anyone to visit in the world. After all, it’s a place with a variety of unique landscapes, but it isn’t...

Must-Pack Items for a Travel Blogging Boss

As a travel blogger, you get to see and explore so many wonderful destinations and meet various interesting people, but before you embark on a new adventure you need to...

Luxury Camping Adventures Around the World

Perhaps in direct response to the dominance of technology in the modern world, many travelers are feeling a strong draw towards nature. While some are able to fully embrace their...

Dredging works underway Plantation Island

Tourists and workers travelling to popular tourist destination Plantation Island, Fiji, are set to benefit from safer access when marine channel dredging is completed at the end of June 2018...

Top 5 Tips for Traveling With Dogs

Travelling with your dog can be thrilling, but sometimes it can turn into a real nuisance. Unless you know how to properly restrain the pooch, whether it’ll be able to...

Top Island Destinations for 2018

When we picture island destinations in our minds, we often imagine a tropical beach of white sand, a sun lounger laid out in the shade of a line of palm...

Why Car Rental Excess Insurance is a Smart Choice

Some car rental agencies include basic damage cover in the standard rental fee, with the option to add on liability reduction, or excess insurance. The addition of excess insurance normally...

More Than a Third of Australians Feel 'Too Busy' With Work to Take a Holiday

New research from InterContinental Hotel & Resorts has unveiled a large number of Australians (32 percent) are simply too busy with work to take some much-needed rest and relaxation. Almost...

Fashion & Beauty

Groom To Do List

Sorry Aussie Men, you no longer just pay for the alcohol, flowers and marriage license. Times have certainly changed. Wedding Expert shares what Australian Grooms are now expected to do before...

Simple Secrets To A More Confident Smile

We all know just how important first impressions are. After a handshake, what’s one of the first things people will notice about you? It’s your smile. A friendly smile is...

Improve Your Body Confidence and Feel Great

No matter how good you feel about yourself, sometimes you just can’t help but see a few little flaws that seem gigantic to you and make you feel self-conscious. Whether...

First-Timer Tips For Your First Lip Filler Appointment

Getting injectable lip fillers can be a quick and effective way to plump up your smile with minimal drama. They’re a cost-effective and safe way to boost the natural shape...

The Most Common Skin Conditions and How to Deal with Them

We often underestimate the importance of our skin, but as the largest organ in our body, and our primary layer of defense, it is constantly affected by many environmental factors...

Beach Babe Basics: Everything You Need to Look Stylish at the Beach

Summer is right around the corner, and this year, we all should make the best of it. Right now, it is not just about looking stylish on the streets, it...

HEALTH

National Action Plan For Endometriosis Is A Game-Changer For Australian Women

Heba Shaheed, The Pelvic Expert, shares her personal story and expert tips for living with endo... First National Action Plan For Endometriosis Is A Game-Changer For Australian Women   The announcement of the first...

Pre - summer pampering: Australian women are detoxifying themselves in the most “kind-Ly” fashion!

In today’s society we are completely exposed to materials, products and chemicals which we unfortunately have no clue if it’s origins, meaning and purpose. Getting back to basics...

Eye Health Dos and Don'ts

Most people take their eyes for granted and spend little to no time thinking about their eye health until they notice something wrong. This leads to plenty of common and...

Non-invasive Cosmetic Treatments

In a world where everyone is chasing perfection, plastic surgeries have become more and more common to the point where it’s odd if you don’t get one during your life...

My Health Yoga

Carrie-Anne Fields of My Health Yoga has taken her Gold Coast yoga teacher training worldwide. She started her health business 20 years ago aged 22 and has grown into a...

Fit Body 101 - Increase Your Fitness Effectiveness

You have to find some space for physical exercise in your weekly schedule in order to live a good life. Embracing this way of life is very beneficial because it...

LIFE STYLE

Add a little colour to your move - and life!

How a little ‘colour’ and planning can take your Move, and make it a more enjoyable one Colour plays a huge role in our lives, it can take us up, or...

6 Simple Rules for Redesigning Your Kitchen

How do you feel about your kitchen? Well, if you feel like your home needs a bit of lifting up, one of the best and most effective places to start...

Dog Flea Allergy

Severe itchy skin disease in dogs causes Flea bite hypersensitivity. The itch is as a result of an allergic reaction to the saliva of the flea which is injected into...

5 Ways to Turn Your Bedroom into a True Zen Retreat

The bedroom should be our little sanctuary where we come to relax after a long day of work. However, in order to be able to unwind all the accumulated stress...

Things to Consider when Deciding on your Wedding Flowers for the Big Day

Choosing the wedding flowers is a complicated process where you have to take into account many elements, from the wedding dress to the wedding theme. You can discover in this...

Renovating tips for your house

There are very few property owners who move into a house where they don’t want to make any changes. Alterations are almost inevitable every time you move-house, but alterations can...

FOOD & DINING

Morning greens: the breakfast skincare regime

It’s safe to assume that most Aussies fail to eat enough greens. Although this was momentarily resolved with the rise and popularity of the green juice movement, the lack of...

Best Hidden Gem Hong Kong Restaurants

You finally find yourself enjoying the endless beauties of China and this fascinating city. In a place with so much variety, all your senses will be wide awake, and your...

JOHNNY DI FRANCESCO NAMED OFFICIAL AMBASSADOR OF EAT STREET MELBOURNE

Johnny Di Francesco, world champion pizzaiolo and owner of Melbourne’s Gradi Group of restaurants, is excited to announce he has been named official ambassador for Eat Street Melbourne 2018. As Ambassador...

The best Mother's Day gift EVER!

Whether it’s to celebrate a special occasion, or just wind down at the end of a long day, there’s nothing much better than pouring yourself a glass (or two…) of...

Sing for Your Supper at Chargrill Charlie’s

To celebrate the final curtain call of the Barden Bellas, Chargrill Charlie’s is giving you the chance to Sing for your Supper! Show off your best acapella vocals to win...

MAKE IT WINE TIME, ANY TIME

Whether it’s to celebrate a special occasion, or just wind down at the end of a long day, there’s nothing much better than pouring yourself a glass (or two…) of...