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Chinese investment in Australian ag falls to zero in 2019 – report

Investment in agriculture by Chinese entities fell to zero in 2019, the first time this has happened since the Australian National University started compiling data in 2014.

Chinese investment into Australia fell by more than 47 percent in 2019, according to the latest update to the Australian National University’s Chinese Investment in Australia Database (CHIIA).

The database recorded a fall from A$4.8 billion ($3.5 billion; €2.9 billion) in calendar year 2018 to A$2.5 billion in 2019, continuing a steady decline overall from a peak of A$15.8 billion in 2016.

Investment in agriculture fell to zero for the first time since the database was launched in 2014 – the culmination of a collapse in Chinese investment in the sector after peaking at A$949 million in 2016, before falling to just A$25 million in 2017 and then A$6.8 million in 2018.

Despite the drop in agricultural investments, the largest single deal completed by a Chinese investor in 2019 was the acquisition of infant formula business Bellamy’s, by dairy giant China Mengniu for approximately A$1.5 billion. This was classed as an investment in the manufacturing sector in the CHIIA.

China Mengniu was subsequently blocked from acquiring Lion Dairy & Drinks by treasurer Josh Frydenberg on national interest grounds, in a sign that the Australian government has hardened its stance on potential Chinese acquisitions of major Australian businesses.

The decision to block that deal followed moves by China to impose tariffs of up to 80 percent on Australian barley, blacklist four major meat processing facilities that export to China, and launch an anti-dumping investigation into Australian wine.

Trade tensions between the two nations have continued to simmer, with Chinese ambassador to Australia Chen Jingye describing Australia’s push for an independent inquiry into the origins of covid-19 as “dangerous” in an April interview with the Australian Financial Review, and suggesting that consumer exports to China could be vulnerable to anti-Australian sentiment.

ANU said Chinese foreign direct investment globally had dropped by 9.8 percent in 2019, suggesting that the much sharper decline in investment into Australia could be associated with negative Chinese perceptions of the investment environment in Australia.

The largest sector for Chinese investment in 2019 was manufacturing, which accounted for 58 percent of the total, with real estate second on 24 percent.

Real estate has accounted for 25 percent of all Chinese investments into Australia since 2014, with mining second on 21 percent. Agriculture, forestry and fishing accounted for just 3 percent of the total invested since 2014.

The database is produced annually and records all completed equity investments by Chinese investors in Australian assets. To qualify, the investment must result in the investor holding at least 10 percent of the equity in the asset.

ANU said the database can produce a more accurate picture of Chinese investment into Australia than official data from the Foreign Investment Review Board and other sources, because the CHIIA does not include announced deals, only realized transactions. It also measures investment by the ultimate source of funds and includes investments made by Australian subsidiaries of Chinese entities in its figures.

The CHIIA was created and is maintained by the East Asian Bureau of Economic Research at the Crawford School of Public Policy, at the Australian National University in Canberra.