Chinese investment in Australia fell to a six-year low in 2020, and the sectors involved in the investment contracted further. Chinese investment in Australia plunged to just over A$1 billion ($775 million) last year, down 62 percent from the previous year, according to a report released Monday (March 1) by the Australian National University’s Chinese Investment in Australia Database.
And the report also showed that 86 percent of the A$1 billion invested by China in Australia last year came from Chinese companies set up in Australia. This means that the investment was made through Chinese subsidiaries in Australia, rather than directly by companies based in China.
In previous years, Chinese investment penetrated almost every sector of the Australian economy, but last year these investments dried up. According to this report from the Australian National University, the areas of investment last year involved only real estate, mining and manufacturing. Of this, $461 million was in real estate, $414 million in mining and $153 million in manufacturing. In contrast, in 2018, investments in real estate alone amounted to $1.1 billion.
In addition, the size of Chinese investment in Australia last year was down even more sharply by nearly 94% from its peak in 2016. That year, China invested A$16.5 billion ($12.8 billion) in Australia in a total of 111 projects, and only 20 in 2020.
The report argues that the apparent contraction in Chinese investment in Australia “reflects the impact of the new crown Epidemic.” Last year, much of the world went into lockdown or introduced strict restrictions in an attempt to contain the spread of the virus.
The report also concluded that “stricter scrutiny of foreign investment, particularly from China, by the Australian government” also contributed to the change in Chinese investment in Australia.
Political relations between Beijing and Canberra deteriorated rapidly last April after Australian Prime Minister Morrison called for an international inquiry into the origins of New Coronavirus.
The Chinese government has imposed restrictions on goods from Australia with trade and non-trade barriers. The Australian government revoked visas for Chinese academics.
In fact, the inflection point in Australia-China relations came in 2017. That year, the Australian Security Intelligence Organization (Asio) warned that China was increasingly trying to influence decision-making in Canberra. Donations from Chinese businessmen to local politicians also came to light.
In late 2017, then-Australian Prime Minister Turnbull announced the introduction of laws aimed at curbing foreign interference. Beijing responded by halting diplomatic visits.
In 2018, Australia became the first country to publicly ban Chinese tech giant huawei from participating in the construction of its 5G network, citing national security concerns. Since then, there have been a number of incidents that have sparked conflict. The diplomatic dispute between the two countries has impacted bilateral trade and investment.
Australia and China are important economic partners in the Asia-Pacific region. China is the world’s second largest economy and was Australia’s largest trading partner in 2018. According to official statistics, trade between the two countries reached A$215 billion ($158 billion) that year. China’s growing economy has allowed some of Australia’s exports, such as iron ore, coal and natural gas, to continue to flow to China. And Chinese tourists and students, as well as significant trade revenues, also continue to flow to Australia.
Chinese investment in Australia continues to be underwhelming in 2021. Under an arrangement, Governor Andrews of Victoria and the governors of other Australian states, as well as the chief ministers of the territories, must detail all agreements with foreign countries to the Australian federal government by March 10 this year, which will then be assessed by the federal government. This includes Victoria’s “One Belt, One Road” agreement with China, which Governor Andrews has said will bring more jobs, trade and investment opportunities to Victoria.
Prime Minister Morrison said in mid-February that Victoria’s Belt and Road agreement with China was not beneficial to Australia and could be scrapped in a matter of weeks.
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