Chinese property investment stifled by the government

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Chinese investment in Australia slid by more than a third in 2018— dropping 36.3% to $8.2 billion, according to KPMG’s Demystifying Chinese Investment in Australia report. Real estate trailed behind healthcare as the top investment for Chinese investors, according to the study.

The study, which was executed in partnership with the University of Sydney, showed that the Australian government is making it difficult for Chinese investors to purchase property in the country.

Overall, Chinese investments in Australia fell because while investors still consider Australia a relatively attractive country where they can grow their money, policy changes in China are getting in the way.

According to an article published by Business Insider Australia, private companies had the biggest share in the investment landscape. The sector accounted for 87% of deal value and over 92% of deal volume. There was an overall trend towards smaller-sized deals, said the publication.

“Despite Chinese global outbound direct investment [ODI] actually growing by 4.2% in 2018, Australia has felt the pinch of a significant reduction to our shores, reflecting the impact of policy changes in China. Our rate of decline has been accelerating and is now closer to the trend observed in the United States and Canada, where Chinese Overseas Direct Investment dropped by 83% and 47% respectively in 2018,” Doug Ferguson, report co-author, and head of Asia and international markets for KPMG Australia, said in a statement.

The annual findings bring Chinese ODI in Australia to the second lowest level since 2008, when investments were driven by mining and gas. However, there is no reason why Australia cannot hit again the higher levels of Chinese capital inflow recorded historically, Ferguson said.

The slowing trend of Chinese investment in Australia is a result of various factors, said Hans Hendrischke, fellow author and professor of Chinese business and management at the University of Sydney Business School. These include changing drivers of Chinese ODI such as increased demand for outbound investment in high value-added sectors to ‘bring back’ expertise; and high-quality brands and products that can aid China in its industrial upgrade and meet the evolving demands of Chinese middle-class consumers.

“As part of this trend, large strategic investments in resources, energy, and infrastructure have given way to smaller investments, into projects that are tactical and directly linked to Chinese consumer market demand. This is particularly evident in the targeting of the Australian healthcare sector by Chinese investors,” said Hendrischke.

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