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Chinese Corporations Show New Patterns of Investment in Australia

FILE - New homes and land for sale are pictured in southern Sydney.

For the first time, almost half of all Chinese investment in Australia is concentrated in real estate, while spending on infrastructure has also increased significantly.

Chinese private sector companies are also investing more than state-owned enterprises, both in terms of volume and value.

The findings are contained in a report titled Demystifying Chinese Investment in Australia by accounting firm KPMG Australia, the University of Sydney Business School and the China Studies Center.

Hans Hendrischke, a professor of Chinese Business and Management at the University of Sydney Business School, said the study has shown new patterns of interest.

“The most striking feature was the change in Chinese investment composition – that is the shift from big projects in the mining and resources area to this huge increase in real estate, and other industries where the Chinese traditionally had not been too strong, such as leisure and construction. They have bought one of the biggest cinema chains in Australia and one of the two biggest construction firms, John Holland,” said Hendrischke.

As Australia’s mining boom fades, cashed-up Chinese companies have looked to real estate for opportunities. There are restrictions on what they can buy and purchases must be approved by Australia’s Foreign Investment Review Board.

Phil Harris, the managing director of Harris Real Estate in Adelaide, said Chinese buyers are inflating prices in Australia's major cities.

“There is absolutely no question that it is having a dramatic effect on property prices in particular areas of both Melbourne and Sydney. I have colleagues who own real estate offices in both of those marketplaces, and in some of those markets they are seeing 80 percent of all purchases – now even 100 percent of purchases in certain areas are going to Chinese buyers. There is no question it is having an effect on property prices,” said Harris.

Last year, the Chinese poured $8.3 billion into Australia. The combination of real estate, leisure and infrastructure made up 79 percent of new Chinese business compared with mining, which was worth 11 percent.

While real estate is the most popular sector, there is also growing interest in Australian agriculture.

Mining magnate Andrew Forrest said it is helping to boost the productivity of farming.

“So far, Chinese investment into Australia - agriculture - has been well received and they're capable of being a strong and passive partner in projects of massive scale which our capital alone could not develop,” said Forrest.

The falling value of the Australian dollar has made investments more attractive, along with a relaxation of Australian visa rules.

Doug Ferguson, the report’s co-author and head of KPMG Australia’s Asia Business Group, said Chinese investment is good news.

“I think it is very important for our economy to be able to successfully move the structure away from mining, gas and power into sectors that have more, maybe, enduring long-term benefit to the broader economy, which I think real estate, which leisure and tourism and agri-business [and] food offers, and that is exactly what is happening, so it is very good news,” said Ferguson.

China is the 6th largest foreign investor in Australia, behind the United States and Britain, although Chinese spending is growing fastest.

The flow of money from China is politically sensitive, especially purchases of real estate and farms. Last weekend, Australian nationalists demonstrated and burned flags outside the Chinese consulate in Sydney to protest what they describe as a “foreign invasion.”