Chinese investment in Australia plunged almost two-thirds last year to less than $1 billion as the impact of coronavirus was compounded by increasingly fraught relations between the two countries.
The reading marks the fourth straight drop and is just a fraction of the $13 billion injected into the country in 2016, with Canberra growing increasingly wary of the Asian superpower’s intentions.
Data from the Australian National University (ANU) released on February 28 showed direct investment plunged to $800 million last year, from $2.05 billion in 2019.
The pandemic has almost halved investment globally according to UN trade body UNCTAD, but a much larger drop was seen in China-Australia flows, according to ANU economics professor Shiro Armstrong.
Last year China’s direct investment to Australia focused on just 20 projects in three sectors – real estate, mining and manufacturing – the fewest in a decade.
Armstrong said: “Naturally, this kind of data is lumpy, because of big projects, but there is a pretty clear trend we can see, since the peak in 2016 it has fallen every year quite steadily, quite dramatically.”
In 2016 there were a number of large investments from the China Investment Corp, a sovereign wealth fund, and China’s State Power Investment Corp bought Pacific Hydro Pty Ltd.
While China remains Australia’s largest trading partner, political relations are at their lowest in decades.
China has slapped punitive sanctions on a range of Australian exports as the two countries clash on a range of issues.
Armstrong said new Australian rules to screen investments for perceived risks to national security had a particularly chilling effect and could help explain the decline.
“There is a national security test now for foreign investment, there have been high profile cases of Chinese investments being withdrawn” he said. “That shakes confidence in foreign investors.”
Australia has rejected Chinese bids for Japanese-owned Lion Dairy and local construction firm Probuild.
The Department of the Treasury is also reviewing existing investments, a probe that could lead to some projects being unwound on “national security grounds”.
That review is expected to conclude by December 10.
According to Australian government figures, China is the ninth-largest investor in the country, well behind the US, Britain, the EU and Japan.
Unlike official data, the ANU figures include investment from Chinese subsidiaries already operating in Australia, and track investments rather than announcements of investments to come.