A New Look at Chinese FDI in Australia

Abstract

Australia is China's largest destination for FDI, most of it directed to the resource sector. The scale and speed of the surge of Chinese investment into Australia, largely from stateowned enterprises (SOEs), has raised the question of whether investments by SOEs require special scrutiny. In China, the question is about the treatment of Chinese investment compared with investment from other countries. Clearly, Australia has had a policy environment that is very open to foreign investment, including investment from China. Nevertheless, it is questionable whether measures recently introduced in Australia to review investment by SOEs will restrict Chinese access to the Australian market or encourage a change in the nature of investment projects. How will Chinese enterprises need to adjust to the disciplines and rules in foreign markets? Will the Chinese Government need to take the regulations of host countries like Australia into account in its supervision of SOEs? Australia remains more open to Chinese investment than any other country in the world. Although the issue of SOE investment raises important new questions for policy-makers in Australia and other countries, Chinese investment in Australian resources is very beneficial and, with appropriate institutional and policy initiatives, will continue its strong growth.

What drives China’s outward direct investment?

“…It is because multinational enterprises (MNEs) from developing countries might have different advantages and motivations from those of developed economies. Acta Oeconomica 65 (2015) This might explain why Chinese ODI in Australia and Africa has been a cause of serious concern to local governments (Drysdale 2011;Song 2011). China's ODI could also be motivated by the desire to upgrade the industrial technological ladder through acquiring advanced technologies, better management skills, and stable supplies of raw materials.…”

Chinese Outward Direct Investment in Australia: Current Condition Analysis and Prospect

“…VIC attracted 33.58% ODI from China, ranking second only to NSW, followed by QLD (9.05%), NT (3.74%), SA (3.58%) and WA (0.76%). By contrast, ACT 6 and TAS attracted zero ODI from China, i.e. these two states did not attract or attracted a very tiny amount of investment from China in 2015 (see Fig.1).…”

“…Some Australian have worried about it that excessive Chinese ODI in Australia and the control of Australian resources resulting from it are likely to let Chinese government indirectly interfere Australian politics. Factors including issues of populism like this and the particular characteristic of Chinese foreign investment ownership (like SOEs' dominance) have constituted "a source of political confusion in Australian policy development and in the Chinese perception of Australian policy" [6].Also, Lou (2014) pointed similar obstacles of trades out [7]. As a consequence, it becomes a realistic issue faced by Chinese government andChinese foreign tradehow to stimulate Chinese non-SOEs to invest abroad in order to balance the ratio of SOEs' participation with that of non-SOEs' participation in foreign trades.…”

“…In this case, in the conflict between production and consumption, consumption dominates this conflict, and productivity as a result cannot be further developed without consumption expansion.See F. Chi in: Understand the "New Normal" of Chinese Economy, edited by China Workers Publishing House, Beijing (2015), p. 302. 6 ACT is geographically located inside NSW, where Canberra (the Australian capital) is located, therefore the political central area. Because of political and economic separation, ACT usually has less frequent trading activities.…”

“…Because private enterprises are characterized by high operating flexibility and adaptability, by contrast, these enterprises are more likely to adapt to the local market regime after going abroad, of which the characteristics and flexibility can possibly reduce or eliminate the negative influence of political uncertainties brought by huge amounts of SOEs' ODI. As for the realistic issues surrounding the rise of Australian populism caused by Chinese SOEs' ODI dominance, Australian government meanwhile shall set an examining framework for foreign investments to fairly treat Chinese SOEs' ODI in Australia, and official consultations and meetings of Chinese and Australian governments are expected to be arranged more frequently on discussing issues of "scrutiny facilitation of competition, corporate governance and financial transparency" surrounding Chinese SOEs [6].…”