A study to be released on Monday shows that private Chinese money has overtaken state-owned-enterprise investment for the first time, which is likely to reduce some of the political tension that has surrounded Chinese government influence over investment.
The
KPMG/Sydney University annual study, which captures real implemented investment, shows that investment fell 9.1 per cent to $US8.3 billion in 2014, but Australia remains relatively competitive with the larger US economy, where investment declined 14 per cent to $US12 billion.
But the key trend was a shift to commercial real estate, infrastructure and leisure industry investment, which collectively accounted for 79 per cent, $7.5 billion, of new Chinese business compared with mining, which accounted for 11 per cent, $992 million.
And despite the political tension over agribusiness, which has resulted in the Abbott government imposing tougher foreign investment rules, this sector accounted for only 1 per cent, $140 million, of Chinese investment.
The report says large transactions were a feature of the year, despite the attention to residential real estate, and lists the four largest as CCCC International's $1.15 billion purchase of John Holland, ID Leisure's $1 billion investment in Hoyts Group, Baosteel's $910 million investment in Aquila Resources and China Merchant's $875 million investment in Port of Newcastle.
The report will be released as NSW Premier Mike Baird meets a trade delegation from China which is emphasising the country's shift into higher-technology manufacturing. Mr Baird will be able to celebrate how NSW is now dominating other states as a destination for Chinese investment, with 72 per cent of the total.
The report is being released amid fears that the debate about the federal iron ore price inquiry will further undermine Chinese investment in the resources sector, but shows that a shift in focus by Chinese investors was already well under way last year.
KPMG Asia business group head Doug Ferguson said: "This is very positive about how new Chinese investment will continue to come."
He said his personal experience had been that the fall in the Australian dollar and the Significant Investor Visa had laid the groundwork for the shift, and Chinese companies were now moving ahead of the formal conclusion of the trade agreement between the two countries, confident that tariffs would fall.
He said NSW was the favoured location because it was the financial services centre, was popular for Chinese large-scale property developers, and was pushing ahead with privatisation.
He said the decline in investment over the past two years was not a serious issue as China was diversifying its investment around the world, but Australia was still a leading destination.
Private investors accounted for 66 per cent of deal value and 51 per cent of deals in a shift that reflects both the increasing role of private business in China, the pressure on SOEs to be more profitable after their offshore investment splurge in recent years, and the greater role of Chinese private investors in commercial property.
A special addition by Knight Frank in the report says the proposed federal government changes to foreign investment in private real estate are "unlikely to deter the large-scale development and investment into commercial and residential markets" by Chinese investors.
It says purchasing from large scale Chinese developers offsets risks for individual Chinese investors, but the big developers are nevertheless shifting thier attention to catering for the broader Australian market.
The steady growth of Chinese investment over the past seven years means that China is now the fifth-largest accumulated investor in Australia, with 4 per cent of the total investment, stock compared with 24 per cent for the US. But the
most recent figures from the Foreign Investment Review Board for 2013-14 show Chinese investors were the biggest source of approved investment, with $27 billion in approved projects that year.
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