'New normal' for Chinese outward direct investment in Australia

The report makes the following predictions for 2015:

• GDP growth is likely to slow down further in 2015, but not dramatically;
• Having likely overtaken FDI in 2014, ODI should see continued double-digit growth in 2015, which will widen the gap further;
• FDI is likely to remain at the 2014 level of around USD120 billion. 

Chinese ODI has entered a ‘new normal’ which will continue to see steady growth off what is now already a high base; with more companies – especially POEs, investing in more sectors across more countries; in targets that enable Chinese companies to move up the value chain and improve their core competitive advantages in terms of technology, product development, branding and quality.  That is why outbound investment will make an important contribution to the transformation of China’s economy, and the advancement of quality economic development. And that is also why we expect to continue to see more investments in new markets, particularly in developed economies.

Agriculture and food, technology, high-end manufacturing, infrastructure and real estate are new ‘hot’ sectors for Chinese investment. 

The ‘One Belt and One Road’ national strategic initiative, together with the establishment of the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund should promote large-scale infrastructure investment in the countries and regions along the ‘belt’ and ‘road’ for at least the next 5-10 years. ‘High-speed rail diplomacy’ is also emerging as an economic and diplomatic tool to promote China’s technology expertise. We expect to see Chinese companies participating in more high-speed rail projects around the world – including as providers of debt and equity capital, suppliers of highly competitive and advanced equipment, and providers of construction services, in both developing and developed countries.
 
The China–Australia Free Trade Agreement (ChAFTA) is expected to stimulate Chinese investment in a number of strategic industries in Australia, including agriculture, animal husbandry, food processing and infrastructure.

Beijing-based Vaughn Barber, KPMG’s Head of China Outbound, says: “With USD1.25 trillion in ODI expected over the next decade, China seems set to enter the fast lane as a ‘global investor’. Overseas investments are helping more Chinese companies from more sectors access new markets, and acquire the experience, technology, brands and human capital necessary to become more competitive. Recipient countries are also benefiting from the capital, experience, cost-competitive inputs to the production process and expanded market opportunities that Chinese investors bring. There is an increasing recognition that Chinese companies can achieve success in areas like infrastructure and agribusiness by ‘partnering’ with incumbent players in key target markets.”

Source:http://www.kpmg.com/au/en/issuesandinsights/articlespublications/press-releases/pages/new-normal-global-china-practice-report-3-feb-2015.aspx

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Caroline He