Chinese investment in Australia plummets 61%
Australia: Chinese investment in Australia plummeted 61% in 2020, the lowest number in six years. Moreover, the drop in investment comes from a growing diplomatic flaw between the two countries. The Australian National University’s Chinese Investment in Australia Database recorded just over $780m in investment.
On the other hand, only 20 Chinese investments are recording in 2020, well below the 2016 peak of 111. Last year’s decline came on top of a 47% drop from 2019 when Chinese investment totaled $1.57bn.
Dr. Shiro Armstrong, director of the East Asian Bureau of Economic Research, however, CHIIA is based, said the decline in Chinese investment in Australia outpaced falling global foreign investment last year. However, “Foreign direct investment fell globally by 42% according to the United Nations (UN),” Dr. Armstrong said in a media release. “UN data is measured differently, but the fall in Chinese investment to Australia was much larger.”
Chinese companies have invested across all sectors of Australia’s economy in recent years. However, last year they only bought into the real estate ($357m), mining ($321m), and manufacturing ($119m) sectors. On the other hand, the drop is at least partly due to Australia’s investment settings during the Covid-19 pandemic. The government announced temporary measures in March that would subject every proposed investment to scrutiny by Australia’s Foreign Investment Review Board.
Subsequently, a review only applied for “non-sensitive” transactions, if the investment was worth $930m, or $213m for investors from countries without a free trade agreement with Australia. The Australian government also announced additional reforms to its foreign investment laws in July which added a national security test and allowed the treasurer to cancel deals retrospectively.
Trade Tensions
The latest figures come against a backdrop of extending diplomatic tensions between Australia and China. Moreover, trade ties have been particularly strained since Australia first called for a hard investigation into the origins of the Covid-19 pandemic in April.
Comeback, China has imposed duty or trading restrictions on Australian goods such as barley, wine, beef, and lobster. In some cases, the rate of wine has been more than 200%.
On the other hand, the tensions have also had an impact on the coal, with dozens of coal ships stranded off China’s coast unable to unload their cargo. This has caused fear in Australia as China is its biggest trading partner, accounting for close to 405 of exports. However, Australia’s trade balance with China hit a six-month high in December. China’s demand for Australian iron ore made up for restrictions on other products.
