|Chinese investment in global markets|
Chinese investment in the global outbound direct investment (ODI) market
China has become world’s 2nd largest outward investor country by 2016, with USD183 billion ODI at 44% yearly growth, also making it one of the net capital exporters in the global market for second year, according to the recently released Report of China Enterprises Globalization 2017.
Cross-border M&A interest from China is proactive and plays a significant role in outward investment. Over the past year, a total of 772 M&A outward investment deals were signed by Chinese investors. According to the Center for China and Globalization (CCG), China spent USD 200billion in overseas M&A deals in 2016, leading to China becoming the most active M&A player.
Chinese investors target more greenfield opportunities in developed countries rather than developing countries, to upgrade technology & competitiveness by obtaining recognition and resources from global market, among which Chinese private companies form strong force in central government’s ‘Going Out’ initiative.
Chinese ODI in Australian Market
In 2016, the recorded number of signed ODI deals from China was 103, an increase of11.7% from 2015. The total ODI value reached AUD 15.3billion making 2016 the 2nd highest year in terms of receiving ODI from China since 2008, and Australia remains the 2nd largest recipient of Chinese ODI globally since 2007 .
Chinese private corporate investment accounts for 76% of deals made and nearly half of the total value. In terms of industry sector, commercial real estate (36%), infrastructure (28%) and medical treatment & health (9%) ranked the top 3 industries for Chinese investment. ODI investment into Australian agribusiness was also significant in 2016, valued at AUD 1.2 billion, it nearly quadrupled from AUD 375 million in 2015. Other sectors that received Chinese ODI are: energy, mining, transportation, renewable energy. While NSW remains the most preferable ODI state for Chinese investors at 53%, followed by Victoria at 25%, also worth noting is that Tasmania attracted AUD 280 million into agribusiness this year.
The above findings demonstrate the changes of ODI objectives and the growing maturity of Chinese investors. By 2016 Australia attracted over 500 large Chinese investors and many more SMEs
Opportunities arising from China-Australia Free Trade Agreement (ChAFTA) & China’s ‘13th Five-Year Plan’
The ChAFTA come into force in late 2015 and lays an historic foundation for the next phase of Australia's economic relationship with China. By 2016, the total two-way trade reached AUD155.2 billion. China remains the largest trading partner of Australia since 2009. Australia is China’s second largest destination for investment abroad while China is Australia’s fifth greatest source of ODI.
ChAFTA will open significant opportunities for Australia in the world’s second largest economy. Over 85 per cent of the value of Australia’s exports to China will enter duty free upon entry into force, rising to 93 per cent after four years and 95 per cent when ChAFTA is fully implemented. Australian services providers will benefit from new access to China’s significant and growing services sector.
Australia is the largest export destination for both goods and services (with two-way trade valued at $155 billion in 2015-2016), accounting for nearly a third of total exports, our largest export market for agriculture, resources and services. There is no doubt that ChAFTA will drive investment, jobs creation and economic prosperity for Australia.
Tariff changes and timing
China’s 13th Five-year Plan
China’s 13th Five-year Plan (FYP) is a roadmap for the nation’s development from 2016. It will focus on one key challenge: continuing China’s economic growth at a relatively fast past and maintaining ‘healthy development’, by changing from intensive outward investment & export to domestic consumption and innovation-driven economic development.
Key industries for investment:
There is no doubt that the investment opportunities between Australia and China are opened up by ChaFTA and the policies and priorities of both countries to support trade. McLean Delmo Bentleys is ready to assist clients in both Australia and China.
This article was drafted by Joie Liang in McLean Delmo’s Guangzhou office.
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