"LOCAL INVESTORS OPEN DOORS FOR CHINESE BILLIONS"

"LOCAL INVESTORS OPEN DOORS FOR CHINESE BILLIONS"

OCTOBER 7, 2018

Chinese investors have ploughed $40.4 billion into the Australian economy in the past four years, new data shows, with NSW and Victoria the main beneficiaries.

Researchers say there has been a major underestimation and misunderstanding of Chinese investment in Australia, with the vast majority of transactions coming from investors registered locally rather than in China, Hong Kong or elsewhere.

The data, which analysed 262 different transactions between 2014 and 2017, shows Chinese ­investment peaked in 2016 with $14.9bn worth of transactions. It dropped to $8.9bn last year, when it slowed for several reasons, including Beijing’s tightening capital controls, financing restrictions, and foreign-buyer taxes.

With investors focusing on mining, real estate and transport, NSW received $15.5bn of the total invested, followed by Victoria, which received $12.4bn. “While little mining activity occurs in NSW and Victoria, many mining companies are registered in those states,” researchers said.

The mining sector accounted for a huge amount of the investment, but last year investments in healthcare and social assistance made up a solid 15.5 per cent of total transactions, up from 9.7 per cent the previous year.

The researchers said 70 per cent of transactions involved a Chinese-controlled direct investor that was registered in Australia, while 20 per cent involved direct investors based in China. Investors registered in Hong Kong, the Cayman Islands, Singapore, British Virgin Islands, Bermuda and Germany made up the rest.

Of the $40.4bn, researchers said about 53 per cent was from what they classified as private ­investment, and 47 per cent was from state investors.

Of the 261 acquisitions analysed, only 22 were joint ventures or a partnership between a Chinese-controlled enterprise and another enterprise.

“Investments were predominantly made by ­acquisition of equity conferring a controlling interest or a significant influence to a Chinese parent company in a going concern located in Australia,” lead researcher Susan Travis wrote.

The data is released today amid heightened US-China tensions, and moves in Washington to pressure China economically by ­potentially restricting their trade relations with allies and partners, in order to build a “trade coalition of the willing to confront China”.

The data, which some hope will show “what’s at stake” in the Australia-China relationship, was prepared by leading economist Peter Drysdale’s East Asian Bureau of Economic Research at the Australian National University.

With the US-China trade war escalating and US policy toward Beijing hardening, Washington sought to include a provision in the replacement NAFTA that ­analysts say is designed to give America veto power over any deal Canada or Mexico might pursue with China.

“We are moving to what I have characterised as a trade coalition of the willing to confront China,” said Larry Kudlow, the White House economic adviser, in an ­indication the approach to NAFTA could be replicated with other partners.

More Chinese investors face some hostility in the West. While the US vetoed several deals involving Chinese investment this year, other countries have followed suit with Germany vetoing a Chinese takeover in ­August on national security grounds for the first time.

Some Coalition MPs have called on Treasurer Josh Frydenberg to block a bid from Hong Kong’s CKI for Australian gas pipelines owned by APA."