KPMG partnership

In July 2011, the University signed a memorandum of understanding with KPMG to create unique business intelligence reports for engaging with China.

Demystifying Chinese Investment in Australia

Chinese investment in Australia declined 10 percent during 2013 against an overall global increase in Chinese outbound investment. 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.

Our report finds Australia is well placed to remain a priority destination, but we can’t afford to rest on our laurels.

Key insights

  • Chinese ODI for 2013 (USD 9.1 billion) fell 10 percent from 2012.
  • Australia dropped to a second priority destination behind the USA for accumulated global Chinese ODI (since 2005).
  • More private Chinese investor activity.
  • Greater diversification of Chinese investments by industry in 2013 with commercial real estate the big winner with 20 transactions.
  • Overall downward trend for new mining investments continued in 2013.
  • Victoria is the number 1 Australian state for Chinese investment.

Demystifying Chinese Investment in Australian Agribusiness

Despite perceptions that Chinese investors are buying up large areas of Australian farmland,new research has found that China is not yet a major agricultural investor in Australia, and in fact, may own less than 1 percent of Australian farmland.

The research has found that, unlike very large-scale investment into the mining and LNG sectors, Chinese investment in Australia’s agricultural sector commenced only quite recently and has been relatively small in total value and transaction volume.

“Our database shows a total of only 10 completed deals, with an accumulated value of US$1.05 billion invested in the Australian agricultural sector since 2006,” said Professor Hans Hendrischke of the University of Sydney Business School.

“Last year, Chinese investment into Australian agriculture accounted for less than 3 percent of the total Chinese overseas direct investment into Australia, including the Cubbie Station deal. Overall, between 2006 and 2012 only 2 percent of Chinese investment to Australia has gone into agriculture.”

By the end of 2012 China ranked the ninth largest foreign agricultural investor in Australia, at 3 percent of the total outbound direct investment (ODI). This is well behind the USA at 24 percent, the UK at 14 percent, Japan at 10 percent, and even Singapore at 4 percent.

“Foreign companies are estimated to own 11.3 percent of Australian land and Chinese companies appear to own less than 1 percent of Australian farmland,” said Professor Hendrischke.

New South Wales attracted nearly 50 percent of completed Chinese agribusiness investment in the research period, followed by Queensland (40 percent), Western Australia (5 percent) and Tasmania (5 percent).

Deal sizes tended to be smaller than other sectors, with 60 percent of Chinese investment in deal sizes of US$5-25 million. Only 10 percent of deals were valued at US$500+ million.

The report identified four characteristics distinguishing Chinese ODI in Australian agribusiness from those of other countries:

  • investment is driven by food safety over food security;
  • an exploratory approach;
  • diversity of ownership; and
  • a preference for controlling investment stakes.

Demystifying Chinese Investment: China outbound direct investment in Australia

Despite an intensity of interest in Chinese corporate investment in Australia and elsewhere around the world, the nature and distribution of this investment in Australia is not well understood. KPMG and The University of Sydney China Studies Centre have, in the past 21 months, undertaken a thorough review of Chinese direct investment in Australia.

Our assessment method and data set provide arguably the most detailed and up-to-date information on Chinese corporate investement in Australia.

Key insights

  • From September 2006 to June 2012, a total of 116 completed deals were recorded. During this period, an accumulated USD 45.1 billion was invested by Chinese enterprises in Australian businesses.
  • West Australian (WA) registered firms attracted the highest level of Chinese investment, by transaction value, from September 2006 to June 2012.
  • Investment diversity has been greatest in NSW. While more than 70 percent of China’s investment volume (USD 7.6 billion) was directed into mining and oil and gas, investment also occurred in real estate, agriculture, architecture and other sectors.
  • The average size of completed deals is larger in Australia, compared with other countries. Nineteen of 116 completed deals have a transaction value of more than USD 500 million.
  • These ‘mega-sized’ deals account for more than 80 percent of total Chinese investment in Australia.

The Growing Tide: China outbound direct investment in Australia

Australia has been the biggest single destination for Chinese outward foreign direct investment (FDI) worldwide over the past 6 years with investments totalling more than US$38.4 billion. While China's investment in Australia have been concentrated in the natural resources sector, the future will be different. Sectors that could increase their potential for greater Chinese FDI inflows include agriculture, financial services and infrastructure.

This report, written in collaboration with the University of Sydney China Studies Centre, charts the significance of China's growing outbound direct investment and examines opportunities for Australian businesses to help meet Chinese demand.

Key insights

  • Incentives for Chinese firms to invest in Australia and other countries are changing and the desire of Chinese enterprises to head abroad is intensifying
  • The expected flood of Chinese capital seeking investment opportunities requires a strategic response from Australian businesses in order to realise the opportunities and maximise the benefits
  • To promote business interaction we need to define a powerful, consistent and persistent marketing and confidence building role for Australian governments in their dealings with Chinese counterparts.

Australia & China: Future Partnerships 2011

The first result of that strategic cooperation was published in September 2011.
The Australia and China: future partnerships report provides insights into the long-term demographic and social forces reshaping China and Australia. In particular, it:

  • analyses in detail the implications of China’s 12th five-year plan for Australian–Chinese economic cooperation
  • identifies the drivers of future alliances
  • focuses on explicit opportunities for stronger engagement in the priority areas of infrastructure, banking, and energy and natural resources.

Key findings include the following.

  • Regulatory restrictions on overseas investments by Chinese companies are likely to be relaxed in the future. This will be a dramatic game changer. One potential change is that government approval will no longer be required for resource-related investments of less than or equal to A$300 million and for non-resource related investments of less than or equal to A$100 million. Given that more than 80 percent of announced Chinese deals in Australia are within the A$300 million limit, this one change alone would shift the landscape.
  • China wants to develop and finance Australian infrastructure. In line with China’s demand for energy and natural resources, Chinese companies are most concerned about infrastructure for coal and iron ore.
  • There are signs of an increasing preparedness to work with Australian partners, including in syndicated loans, and an interest in the funding and joint development of resources infrastructure. China is prepared to consider long-term and close institutional cooperation with Australia, even at multilateral level.
  • China is beginning to place more emphasis on Chinese private corporate investment in Australia, in a move away from the exclusive involvement of large state-owned corporations. With this comes an increased emphasis on market mechanisms and risk diversification. This is already transforming the engagement between Australia and China.
  • There is potential for China, Japan and Australia to fully develop the respective advantages of their resources industries and agree on the structure of collaboration. This could lead to the three countries creating an Eastern Resources Commodities Trading Centre in their time zone with links to the key global trading hubs of London and New York, to form a new 24-hour resources commodities trading centre. There are already initiatives forming in this regard.
    Australia is currently a target country for Chinese banks’ drive to head abroad.
  • Chinese banks use Australia as a training ground for investments in resource enterprises and also a platform for helping Chinese banks acquire experience, skills and capabilities and expand globally. Australia has become an important long-term strategic base for Chinese banks.

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