29/05/2015 - 14:29

China shifts investment focus

29/05/2015 - 14:29

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New South Wales has overtaken Western Australia as the favoured destination for Chinese direct investment in Australia, as the near decade-long resources and energy sector boom tails away.

China shifts investment focus
ON THE MOVE: China is shifting its financial attention away from WA.

New South Wales has overtaken Western Australia as the favoured destination for Chinese direct investment in Australia, as the near decade-long resources and energy sector boom tails away.

This came despite an increase in Chinese direct investment in WA to around $1.2 billion last year, up from just $300 million in 2013, according to a KPMG report.

The report, ‘Demystifying Chinese Investment’ said that as a percentage, WA accounted for 12 per cent of inbound Chinese direct investment in 2014.

Although this was up from 3 per cent the previous year, it was well below the average of the seven years prior, which was more than 30 per cent, KPMG said.

The key drivers for WA’s fall in investment share were a reduction in resources and energy investment and a commensurate increase in the commercial real estate sphere.

Nationally, commercial real estate investment made up almost half of the total inflow, while mining fell to just 11 per cent.

Oil and gas was 7 per cent of the total.

The biggest beneficiary of this change was NSW, which received 72 per cent of the total inflow.

The total stock of foreign direct investment in Australia was around $690 billion at the end of the period, with Chinese investment representing slightly more than 4 per cent of that figure.

China’s share has increased rapidly in the past decade, but as a proportion of the total it well behind investment by the US, which stood at $25 billion in 2014.

University of Sydney professor of Chinese business and management, Hans Hendrischke, said Chinese companies would invest more than $90 billion into Australia in the coming decade

“In our 2013 annual update report, we observed that Chinese direct investment in Australia had reached a turning point away from resources towards real estate, infrastructure, and consumer sectors,” he said.

“This trend has continued in 2014.”

KPMG Australia head of Asian business group Doug Ferguson said it was likely that would be the case in future.

“It is not surprising to see that Chinese companies’ investment destinations are changing, from resource-rich developing countries to developed countries providing access to advanced technologies, established brands, extensive industry experience and worldwide distribution networks,” he said.

“While the trend away from resources has led to a decline in Chinese investment in Australia, the trend towards real estate, leisure, advanced technologies, food and services works in Australia’s favour for the longer term.”

He added that other key investment areas would be energy, infrastructure, tourism and agribusiness.

Agriculture was an increasing area of interest in 2014, according to KPMG, although it only represented 1 per cent of incoming Chinese direct investment.

For WA, one major transaction involved beef exports, with private Chinese meat processor Grand Farm inking an agreement for joint investment plans with Bunbury-based V&V Walsh.

The Australian-Sino 100-year agricultural and food safety partnership was also established under the leadership of Andrew Forrest, aiming to have 50 members from both nations to promote collaboration in food safety.

In addition, the recent free trade agreement with China could boost further interest in the sector.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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