Tasmania was the leading state for Chinese investment in 2019 due to the acquisition of Bellamy’s Australia by Mengniu Dairy. However, despite strong bilateral trade, Chinese direct investment into Australia fell by 58 percent overall, partly due to Beijing’s renewed focus on countries involved in the Belt and Road Initiative (BRI).
However, direct foreign investment from Chinese firms into Australia dropped with the number of transactions falling from 74 to 42.
The dollar value of these transactions fell from $8.2 billion in 2018 to $3.4 billion (US$2.3 billion) in 2019, representing a 58 percent drop.
The report, by KPMG and the University of Sydney, found a combination of factors contributed to the fall, including tighter overseas investment regulations, wariness of Australian investment rules, and a shift towards Latin America and BRI projects in developing countries.
“These countries are all implementing tighter foreign direct investment screening measures, which goes some way to explaining the fall in Chinese investment in Australia over the last financial year,” he said.
Tasmania Takes the Lead, NSW Still Popular
Chinese investment in Australia has seen a continuous decline since 2016 when Chinese firms invested $18 billion (adjusted for inflation) into local assets.In 2019, Tasmania was the highest recipient of foreign investment at 44 percent, followed by New South Wales (31 percent), Victoria (12 percent), with Queensland and Western Australia tied at 6 percent each.
The takeover was approved on the grounds the majority of board members were Australian citizens, the corporate headquarters of Bellamy’s remained in the country for at least ten years, and $12 million was spent improving infant formula processing facilities in Victoria.
The report found in the commercial sector Chinese investment was mainly directed at smaller acquisitions valued below $50 million. According to Doug Ferguson, co-author of the report, Sydney and Melbourne would continue to be the most popular investment destinations.
“The private sector will continue to be most active, deal sizes will be smaller, and most states and territories will continue to be active, with NSW and Victoria the largest and most attractive.”
Unlike the annual report from the Foreign Investment Review Board (FIRB), the KPMG study does not include residential property sales.
Further, FIRB reports are calculated based on the number of applications it receives, the KPMG study however counts the number of “legally binding contracts” entered into by parties (which may or may not be screened by the FIRB).
