WESTERN Australia continues to attract the lion’s share of Chinese investment in Australia, receiving more than half of capital invested in the nation in 2012.
Almost $US6.4 billion worth of Chinese investment deals were completed in WA in 2012, according to a joint study undertaken by KPMG and the University of Sydney’s China Studies Centre.
These included PetroChina’s $1.5 billion acquisition of a 9.9 per cent stake in the offshore Browse Basin from BHP Billiton, and Guandong Nuclear Power Group’s $2.1 billion takeover offer for uranium explorer Extract Resources.
The resource-rich states of WA and Queensland attracted a combined 90 per cent of Chinese investment into Australia in 2012. While the distribution of investment was considerably less even than in previous years, the figures reflect a broader trend of those states attracting the greatest proportion of Chinese investment.
In the six years to 2012, WA attracted 32 per cent, or $US16 billion, worth of Chinese investment into Australia, while Queensland was narrowly behind.
In both of those states, the overwhelming majority of deals were in the mining and oil and gas industries.
However experts suggest the nation will remain well placed to capitalise on foreign investment beyond the mining boom, with Chinese demand expected to diversify in the years to come.
KPMG’s head of Australia China Business Practice Doug Ferguson said he expected to see continued investment growth in areas recognised as world’s best practice.
“While mining and resources still dominate investments, we’re seeing greater diversification towards LNG, agribusiness, renewable wind energy and real estate,” Mr Ferguson said in a statement.
“We are starting to see the next wave of Chinese investment in Australia being made by privately owned companies and this trend will continue under the new investment visa program, which opens the door for high net wealth Chinese investors.”
State-owned enterprises have dominated China’s overseas investment but the proportion of investments by privately owned companies more than doubled during 2012 from the historic trend.
Despite this, Mr Ferguson cautioned that given the large size of deals in Australia: “the dominance of state-owned enterprises is likely to continue as these companies dominate the energy, mining and infrastructure sectors at home in China and have strong central government support to invest abroad.”
While the US and Canada have bridged the gap, Australia has attracted the highest cumulative share of Chinese foreign direct investment over the past six years.
Total Chinese accumulated investment in Australia between 2006 and 2012 reached $US51 billion, just ahead of the US at $US50.7 billion and Canada at $US36.7 billion.
Canada was the leading destination for Chinese investment in the 2012 calendar year, with the $US21.3 billion invested there driven by the completion of a $US15 billion takeover of Canadian oil and gas company Nexen by Chinese state-owned enterprise CNOOC. China invested $US14.7 billion into the US and $US10.5 billion in Australia in 2012.
The University of Sydney’s Hans Hendrischke said the latest figures indicated China was looking to spread its investment, with the US and Canada set to become the immediate benefactors.
“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,” Professor Hendrischke said.
This week, global bank HSBC underscored the KPMG findings with its own survey revealing that Australia’s business-friendly conditions made it a priority for Chinese investment.
However, the HSBC survey revealed something different. Chinese interest was expanding into manufacturing and retail trade sectors rather than the mining industry.
Among more than 250 responses, 12 per cent said they had established an Australian operation, the third most popular destination after the US, 22 per cent, and Singapore, 18 per cent.
More than two thirds of the Chinese companies surveyed were expanding to help the flow of foreign trade and nearly as many wanted to increase their sales networks. HSBC said only one third was investing offshore to secure raw materials supplies.
More than half of the Chinese companies already in Australia were in manufacturing, 28 per cent were non-resources import/export business and 20 per cent were in mining.
