The Demystifying Series of reports provide comprehensive analysis of China's outbound direct investment (ODI) into Australia. They are based on the dataset compiled by a joint University of Sydney and KPMG team and covers investments into Australia made by entities from the People's Republic of China through M&A, joint venture and greenfield projects.
2018 was a year of uncertainty in global economic affairs amidst slower global growth, decline of global foreign direct investment (FDI) and general apprehension about worsening conditions for international business.
Chinese investment in Australia declined by 37.6 percent in USD terms or 36.3 percent in AUD terms in 2018, from USD 10 billion in 2017 (AUD 13 billion) to USD 6.2 billion (AUD 8.2 billion).
Chinese investment in Australia dropped to USD 10.3 billion (AUD 13.3 billion) in 2017 – down 11% (in USD terms) from 2016 - despite renewed investment in mining, continued investment in commercial real estate and a surge in healthcare investment. Changing regulatory, political and economic landscapes impacted on new investment flows from China to the world during the year, with global Chinese overseas direct investment falling by 29%.
The report, Demystifying Chinese Investment in Australian Healthcare, which covers investments into Australia made by entities from the People’s Republic of China through M&A and joint ventures in calendar years 2015 to 2017, found that investment has been concentrated in the health supplement and medical treatment sectors in Australia. To date there has been no significant investment in pharmaceuticals, biotechnology or aged care.
Australia retains its position as the second largest recipient of Chinese ODI with data showing close to USD 90 billion of accumulated new investment since 2007.
Chinese investment in Australia returned to positive growth in 2015, rising very strongly with a record number of deals taking Chinese investors into new industries - including healthcare for the first time - and new geographies.
Dramatic structural changes have driven strong shifts in the sector, number and types of deals being made by Chinese investors in Australia in 2014. For the first time nearly half of investment was concentrated in commercial real estate transactions, with investment in infrastructure also increasing significantly. Also for the first time, Chinese private sector investment exceeded state-owned enterprise investment, both in terms of volume and value.
Until 2012 Australia was the largest recipient of Chinese Outbound Direct Investment (ODI), but dropped to second place behind the United States in 2013. Australia was able to rely on its natural resources endowments and various other comparative advantages including geography. The slow down of investment in the Australian resources sector exposed Australia to more global competition for diversifying Chinese investment.
KPMG and the University of Sydney analysed 23 Chinese SOEs across a range of industry sectors to determine how they operate in Australia, and whether their modus operandi differs materially from other international investors.
The Business Council of Australia has released a Discussion Paper on Foreign Investment and State-owned Enterprises: Managing the Risks to Maximise the Benefits that draws on the findings of the report commissioned by the BCA and undertaken by KPMG and the University of Sydney.
While Australia's accumulated Chinese direct investment is still ahead of its main international competitors, there is no denying that the rest of the world is hot on our heels and aggressively competing for Chinese capital.
Despite strong public interest, little detailed factual information has been previously available about the actual nature and distribution of China's outbound direct investment (ODI) in Australia. This specialist report continues our comprehensive reporting of China's ODI into Australia.
China's largest energy companies have rapidly increased their stakes in Australia's energy sectors in recent years, motivated by the same factors that have underpinned their acquisitions in the resources sector.
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.
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.
In the future it will be difficult, if not impossible, to have a strong global or domestic business without a strong China business relationship, concludes new collaborative research from KPMG in Australia and the University of Sydney China Studies Centre into the future of reciprocal trade between Australia and China.
KPMG Australia and The University of Sydney China Studies Centre, 2011. Australia & China: Future Partnerships 2011. Demystifying Chinese Investment in Australia. Sydney: KPMG Australia and The University of Sydney China Studies Centre.