Monday, 08 June, 2020
FT – Chinese investment in Australia falls 58%
FT – Chinese investment in Australia falls 58%
Tensions over the coronavirus pandemic have strained ties between Canberra and Beijing
Jamie Smyth in Sydney and Thomas Hale in Hong Kong 6 MINUTES AGO
Chinese investment in Australia fell to its lowest level in a decade last year following the implementation of tougher rules on foreign investment and a sharp deterioration in diplomatic relations between the nations.
Chinese companies invested A$3.4bn in 2019, down 58 per cent from A$8.2bn a year earlier, with just 42 deals completed during the 12 months to the end of December, according to a joint report by KPMG and the University of Sydney.
A single deal, Mengniu Dairy Company’s purchase of Bellamy’s for A$1.5bn, accounted for almost half of total investment in 2019.
“Australia’s decline mirrors that of a number of western countries, including the US, Canada and members of the EU, which are implementing tighter foreign investment screening measures, and strategic risk perceptions of Chinese investors of overseas markets,” said Hans Hendrischke, professor at the University of Sydney Business School and co-author of the report.
Chinese businesses have invested more than $100bn in Australia since 2008, in a decade-long investment boom that has boosted economic growth and two-way trade between the nations.
But a surge in diplomatic and trade tensions has damped business investment and threatened to undermine record two-way trade, which increased by 21 per cent to A$235bn in the six months to the end of June 2019.
On Saturday, Beijing fired the latest salvo in its battle with Canberra when its ministry of culture and tourism issued a travel warning to its citizens, saying there had been a “significant increase” in racist attacks on “Chinese and Asian people” because of Covid-19.
It did not provide any evidence of such attacks, although there have been anecdotal instances of racist incidents against Asians in Australia in recent months.
Canberra has rejected the allegations of increased racist attacks, adding that the claim had “no basis in fact”.
Sino-Australian relations have sunk to their lowest level in a generation following Canberra’s call for an inquiry into the origins of the coronavirus pandemic in April.
In May, Beijing imposed punitive trade sanctions on Australian barley and some beef exporters, though it is set to remain dependent on Australian iron ore as it increases steel production and prepares for a wave of infrastructure spending.
Last week, Canberra warned of even tougher rules on foreign investment, including the introduction of a national security test for all new investments by foreign investors, regardless of the size of the investment. It will also strengthen its monitoring powers to ensure foreign investors comply with conditions of their approval for acquisitions.
Chinese state media criticised the new rules. Global Times, a state-backed tabloid, said the regulations “could further cast a shadow” on Chinese investment in Australia.
“Although the Australian government did not name any country, there is a wide belief that they are pointing this at China”, the newspaper said, highlighting what it called “recent verbal attacks” on the country from Australian officials.
Doug Ferguson, KPMG partner and co-author of the report entitled “Demystifying Chinese Investment in Australia”, said he expected overall Chinese foreign direct investment in Australia to remain subdued in the coming year.
“The impact of Covid-19 will no doubt have an ongoing influence as governments move to protect critical infrastructure and tech, and try to prevent opportunistic acquisitions of companies at undervalued prices,” said Mr Ferguson. “Restrictions on travel have practically disabled new dealmaking and due diligence activity.”
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