China FDI to Australia more than halved in 2019, to remain subdued this year, study says

(C) Reuters.

SYDNEY (Reuters) – Chinese investment to Australia more than halved in 2019 and it would continue to fall this year due to the coronavirus outbreak and negative perceptions around government screenings of such inflows, says a report by KPMG and the University of Sydney.

The number of deals fell 43% to 42 for the year ended Dec. 31, while investments fell 62% to $2.4 billion.

“Chinese (overseas direct investment) into Australia has fallen at a faster rate in 2019 than Chinese investment into other western countries, including the U.S.,” said report author Hans Hendrischke, professor of Chinese business and management at the University of Sydney.

Privately-owned Chinese firms accounted for 84% of Chinese investment in Australia by value and 76% of the deals.

Australia announced substantial changes to foreign investment rules on Friday that would extend the existing scrutiny of state-owned investors to private investors, and impose a national security test for purchases in sensitive areas.

The tightening of foreign investment screening globally had been accompanied by a worsening perception of China and the “purpose” of investments, the report said, adding, this “could become more negative as a result of the coronavirus pandemic”.

“Locally, Chinese investors have taken this to be another signal that Australia is less welcoming of their investment” it said.

Food and agriculture (44%) was the largest area of Chinese investment, led by the A$1.5 billion ($1.05 billion) acquisition of Bellamy’s Australia by Mengniu Dairy Company.

Commercial real estate made up 43% of Chinese FDI, while deals in the mining sector fell by half.

Chinese state-owned enterprises had moved investment away from developed markets and towards the countries aligned with China’s Belt and Road Initiative, and Latin America, the report noted.

“We expect overall Chinese FDI in Australia to remain subdued in the coming year,” said Doug Ferguson, report co-author, and head of Asia & international markets for KPMG Australia.

($1 = 1.4276 Australian dollars)