When Australia’s largest dairy farm was sold to Chinese buyers recently, its biggest tabloid paper headlined that the government was “Milking Us Dry!” by approving the deal.
That chimes with a survey showing most Australians think too much Chinese property buying is allowed Down Under. The reality is China accounted for just over four percent of foreign investment at the end of 2014, slightly less than the Netherlands.
With federal elections looming as soon as July, neither the ruling coalition nor the opposition has yet sought to engage on the issue of Chinese money. Failure to adapt risks forgoing much of a slice of the more than $1 trillion in outbound investment funding that China has targeted for the decade to 2024, at a time when Australia is searching for growth drivers to replace mining.
“Australia needs to start having the grown up conversation that it has so far evaded,” said Hugh White, a professor of strategic studies at the Australian National University in Canberra. “China, even at lower growth rates, is going to remain the most important source of economic opportunities for Australia.”
China currently accounts for about a third of Australia’s trade, earning the mineral-rich country the equivalent of five percent of its gross domestic product.
That puts it in prime position to benefit from President Xi Jinping’s pledge in November 2014 that, as well as importing over $10 trillion of goods globally in the coming five years, the nation planned outward investment of $1.25 trillion over the following decade.
It’s making a slow start Down Under. Excluding residential property, investment from China weakened in 2014 to $8.4 billion because of a shift away from resources, according to a KPMG report. Much of the focus from China now is in commercial property, infrastructure and services industries such as tourism and entertainment, where Australia could offer opportunities.
Stricter rules could be delaying such deals, with Australia vetting Chinese purchases far more closely than most others. The government last year tightened scrutiny for selling farmland to Chinese buyers, meaning that purchases of A$15 million and over must be screened for approval, along with the Japanese and Koreans. Americans don’t need permission for similar deals under A$1.1 billion.
China also has the highest proportion of referrals to Australia’s Foreign Investment Review Board of any nation. That’s partly due to surging demand for Australian real estate, which is further fueling resentment Down Under as prices soar.
“Every time there’s a new wave of investment, as there was in the 1980s with the Japanese, there’s the same sort of slogans, opposition and fears,” said Andrew Robb, former trade minister and architect of the Australian side of the China-Australia free trade accord that came into force last year. “We need foreign investment in this country and I’m confident that as it has in the past, this will settle down.”
Australia could use more offshore dollars after domestic businesses cut back their spending plans to the lowest level in nine years in the fourth quarter. That’s disappointing for central bank Governor Glenn Stevens, who had been counting on record low interest rates and a weaker currency to encourage companies outside resources industries to step up their spending.
China’s economy may have expanded 6.9 percent in the first quarter from a year earlier following “some positive signals” from economic data in January and February, China International Capital Corporation economists wrote in a recent research note.