KPMG: Chinese investment into Australia fell by more than a third in 2018

(Marcelo Endelli / Getty Images)
  • China invested $8.2 billion into Australia in 2018, according to a new KPMG report.
  • That’s 36.3% less than it invested in 2017, and a warning sign for the wider Australian economy.
  • “Australia has felt the pinch of a significant reduction to our shores,” said Doug Ferguson, the co-author of the report.

Chinese investment into Australia fell by over a third last year, according to KPMG, who published a report titled “Demystifying Chinese Investment in Australia” on Monday.

Investment from Asia’s largest economy dropped 36.3% to $8.2 billion in 2018, according to the study, which was carried out in partnership with The University of Sydney.

KPMG said that Chinese investors still consider Australia as a relatively attractive country to invest their money, but policy changes in China are complicating matters.

Private companies dominated the investment landscape, accounting for 87% of deal value and more than 92% of deal volume. There was an overall trend towards smaller sized deals.

Healthcare replaced real estate as the number one investment destination for Chinese investors. That’s likely because the Australian government is making it harder for Chinese investors to buy property in Australia.

Doug Ferguson, report co-author, and Head of Asia & International Markets for KPMG Australia, said in a statement: “Despite Chinese global outbound direct investment actually growing by 4.2% in 2018, Australia has felt the pinch of a significant reduction to our shores, reflecting the impact of policy changes in China.

“Our rate of decline has been accelerating and is now closer to the trend observed in the United States and Canada, where Chinese Overseas Direct Investment dropped by 83% and 47% respectively in 2018.”

Ferguson added: “While this annual result brings Chinese ODI in Australia back to the second lowest level since the mining and gas driven investment peak year of 2008, there is no reason why Australia can’t return to higher levels of Chinese capital inflow seen historically.”

Fellow author, Professor Hans Hendrischke, Professor of Chinese Business & Management at the University of Sydney Business School, added: “The continued reduction in Chinese investment in Australia reflects a combination of factors, including changing drivers of Chinese ODI such as an increased demand for outbound investment in high value-added sectors to ‘bring back’ expertise and high-quality brands and products that can support China’s industrial upgrading and meet the evolving demands of Chinese middle class consumers.

“As part of this trend, large strategic investments in resources, energy and infrastructure have given way to smaller investments, into projects that are tactical and directly linked to Chinese consumer market demand. This is particularly evident in the targeting of the Australian healthcare sector by Chinese investors.”

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