Chinese investment in Australia falls to record levels – Business News (Trending Perfect)


“This is due to the perception that such investments offer lower initial financial risk and the potential for high long-term rewards. Such investments also help Chinese investors avoid the complexities and entrenched challenges associated with merging or acquiring Australian-based companies.”


However, Chinese investment in areas such as solar panels is causing international tension. During a visit to China this month, US Treasury Secretary Janet Yellen expressed concern about Chinese overproduction in areas such as electric cars, solar panels and other clean energy technology.

In 2023, the cost of producing solar panels in China fell by 42 percent, giving their manufacturers a huge cost advantage over international competitors, especially the United States, according to energy analysts Wood Mackenzie. China dominates global production of solar panels, accounting for 80 percent of the market.

The KPMG and University of Sydney report said another reason for the decline in Chinese investment in Australia is the increasingly redirecting of Chinese funds towards Belt and Road Initiative projects. Last year, Chinese investments in these projects rose by 28 percent to reach $32 billion.

China's Belt and Road Initiative policy aims to advance its economic and security interests with multiple countries through external development. Investment in Belt and Road Initiative projects represented a quarter of non-financial foreign direct investment in China, which amounted to $130 billion last year.

The report warned that the growth of Chinese investment in Belt and Road Initiative projects poses a competitive threat to Australian companies, with money shifting from infrastructure development to supporting the processing sectors. “Such a move could pose competitive challenges in sectors where Australia has historically enjoyed attractive investment.”

An example of this threat is the billions of dollars of Chinese investment that has flowed into Indonesia, helping it develop into a global nickel hub. Investments and technology provided by Chinese companies have enabled Indonesia to process raw ore into high-quality nickel, which is what Australia has done.

Thanks to this improved capacity, Indonesian nickel flooded the market, driving down the price of the metal, which hurt Australian miners and reduced jobs and production. China is the world's largest buyer of nickel.

However, research conducted by the Lowy Institute last month was more cautious about infrastructure projects funded by the Belt and Road Initiative in Southeast Asia. She noted that funding for many of these projects has been canceled or reduced due to rising costs, domestic political instability, and economic pressures facing China.

China's economic growth is expected to slow to 4.5 percent this year from 5.2 percent, according to the World Bank, due to high debt, a weak real estate sector and trade frictions.

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