Chinese investment in Australian ag slows to trickle in 2018

Only $85m of deals were made by Chinese investors into Australian agriculture, part of an overall decline in investment in all sectors of 37.6%.

Chinese investment in Australia declined by 37.6 percent in 2018, with deals in agriculture comprising less than A$100 million ($71 million; €63 million) in value.

A joint report by KPMG and the University of Sydney found Chinese investment fell to $6.2 billion in 2018, down from $10 billion in 2017.

Demystifying Chinese Investment in Australia reported just $85 million, or less than 1 percent of the overall figure, was invested in food and agribusinesses, a drop of 92 percent from 2017.

The 2018 figures covered only three deals in the sector, while the 2017 figures reflected one large deal, the report said, referring to the A$1 billion acquisition of The Real Pet Food Company by Hosen, New Hope and Temasek.

Report co-author Hans Hendrischke, professor of Chinese Business Management at the University of Sydney’s China Studies Centre, told Agri Investor that Chinese involvement in Australian agriculture had undergone a period of consolidation, leading to less dealflow.

“We had all the stories and controversies about Chinese buying land, but I think that’s now reduced and on the Chinese side there’s an understanding that buying land is not actually something they want,” he said.

“In the end they’re better off taking that risk with Australian partners [as] their strength is much more on the processing side.”

Hendrischke cited the example of an abattoir near Townsville, in northern Queensland, where Chinese investment had allowed the facility to continue operating by providing processed meat to send to China, as opposed to relying on live cattle exports. “This is where Chinese investment in agriculture is heading,” he said.

More broadly, Hendrischke said the bilateral relationship between Australia and China was only a “minor factor” in the overall decline in investment, arguing that capital export restrictions and pressure on Chinese corporations to reduce foreign debt levels were bigger factors.

“We did hear in our survey that the Foreign Investment Review Board has dampened Chinese interest in investment because there’s a degree of insecurity about what will be affected by security issues and whatnot,” he said.

“The Australian government is keen to say that we are open to foreign investment. But of course, what has happened in the last one or two years, is that the dialogue about investment has been very mixed, because it was to some extent dominated by security concerns.

“That has sometimes overshadowed the economic rationale [behind investments]. But it’s not the major issue.”

Hendrischke added that it was “very hard” to make a prediction about the levels of Chinese investment in 2019 due to ongoing uncertainty over the outcome of the US-China trade dispute.

“If the trade war drags on, we might stay at this level [of investment],” he said. “Whether we go down further is hard to say.”

Chinese investment in Australia was focused on the east coast, with 53 percent of the overall figure flowing into New South Wales and 27 percent into Victoria.

The most popular sector for investors was healthcare, which accounted for 41 percent of the overall figure, with commercial real estate in second place on 36.7 percent, and oil and gas on 8.8 percent.

On sentiment toward Australia, 67 percent of respondents to the survey regarded Australia as a safer economic environment than many other countries, up from 52 percent in 2017.

Some 59 percent of respondents stated that the political debate in 2018 has made Chinese companies more cautious to invest in Australia, although this was down from 70 percent in 2017.

Only 19 percent of Chinese investors reported a negative average return on net assets in Australia, with 45 percent reporting an average return on net assets of more than 6 percent.