Why is China Investing Heavily in Australia?

Australian Politics, China, Economics, Rundown, Trade

China has been aggressively investing in Australia’s agricultural sector. From 2015 to 2016, Chinese investments grew from $300 Million to more than $1 Billion. In addition to agriculture, China has been pouring money into Australia’s real estate sector and ports areas.

One reason why Chinese are investing into Australia’s agricultural sector is that they view the Land from Down Under as a valuable resource of goods they could potentially sell back to their Mother Land.

“Made in Australia” has spawned a robust and healthy market among Chinese consumers. There is high demand for fruits, meats, wine, dairy and minerals from Australia.

A contributing factor to the shift in demand from Chinese made to imported goods from Australia, were the continued outbreaks on tainted locally produced infant formula.

Australian real estate is another big market for China.

According to the 2016 annual report by the Foreign Investments Review Board, China is the largest buyer of Australian property dropping $24.3 Billion from 2014 to 2015. The amount is triple the total investment of the United States and six times that of Singapore.

On a year- to- year comparison, from 2013 to 2014, China had invested $12.4 Billion in Australia’s property market. In New South Wales, China accounts for 87% of all foreign buying.

In June 2017, CNN ranked Sydney as having the second most expensive real estate market in the world just behind Hong Kong. But that hasn’t stopped China where the combined net worth of millionaires is larger than the total value of Australia’s housing stock.

China has been buying property in Australia the past decade because of three reasons:

  • Wealthy Chinese prefer to enrol their children in Australian universities.
  • There is an expanding community of Chinese immigrants in Australia.
  • The Chinese have grown to love and appreciate the Australian lifestyle.

But Australia is alarmed at the trend because it could push out locals from acquiring property in their home land. Australia has significantly decreased incentives for foreign buyers while New South Wales has increased taxes to 8% of the purchase price for foreigners.

For its part, the Chinese government has imposed restrictions to control the outflow of capital from the mainland in order to maintain foreign reserves and a strong Yuan.