Chinese investment in Australia increases in 2016, commercial real estate remains dominant sector for investment

Record investment in infrastructure and agriculture helped propel overall Chinese investment in Australia to US$11.49 billion (AU$15.36 billion) in 2016, the highest level since its 2008 peak, according to the KPMG and The University of Sydney’s report on Chinese investment into Australia in 2016.

Continuing last year’s growth trend, a record number of deals saw Chinese companies continuing to diversify their investments into different industries and geographies – with energy sector investment surpassing mining for the first time. Tasmania received a record AU$280 million in agribusiness investment, while NSW remained the dominant state recipient of Chinese investment (53 percent).

On the international stage, Australia maintained its position as the second largest recipient of aggregated Chinese direct investment, attracting around US$90 billion since 2007, behind the United States which has received more than $100 billion of investment in the same period. However, Australia’s relative growth has fallen behind other countries.

In Australia, commercial real estate remained the dominant sector for investment for the third year running, accounting for 36 percent of the total deal volume. However the nature of real estate investment shifted significantly in the past twelve months, with residential development sites (commercial developments) accounting for 51 percent of real estate deal value in 2016 (compared to just 27 percent in 2015, when office investment was dominant).

Record Infrastructure investment of AU$4.34 billion was achieved, driven by the multi-billion dollar Asciano Ltd and Port of Melbourne transactions. Agribusiness investment grew from a humble $375 million in 2015 to over AU$1.2 billion in 2016 – its highest year on record. Energy investment topped AU$1.15 billion while healthcare investment also remained strong at AU$1.35 billion.

2016 was a breakthrough year for Chinese private company investors, who accounted for 76 percent of deal number and nearly half of the total project value.

These are among the key findings of the latest Demystifying Chinese Investment in Australia (May 2017) report by KPMG Australia and The University of Sydney, analysing Chinese outbound direct investment into Australia in calendar year 2016 . Knight Frank contributed data and analysis on real estate transactions, and Powell Tate provided insights on gaining a social license to operate in the agribusiness sector.

“There are signs of a growing maturity by Chinese investors in the Australian market – with more private company investment and a higher number of joint ventures alongside more repeat investments by established Chinese companies,” commented report co-author, Doug Ferguson, Head of Asia & International Markets, KPMG Australia. “The past year was a breakthrough year. Despite the impact of uncertainties about Australia’s foreign investment review regime, Chinese investment in Australia continued to diversify and records were smashed.”

Professor Hans Hendrischke, Professor of Chinese Business & Management at the University of Sydney Business School commented: “Australia has proven itself to be a preferred destination for Chinese capital, but we must be cognisant that the growth in investment is slowing compared to other parts of the world such as the United States and the EU. Going forward, efforts by the Chinese Government to increase oversight and accountability for overseas investments as well as geopolitical factors are expected to have an impact on investment flows globally.”

Source: KMPG

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