Issue 149 - The Australian Chamber of Commerce in Hong Kong.

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6 | AUSTRALIA FOCUSDemystifying Chinese Investment:China outbound direct investment in AustraliaThis is from a joint publication from KPMG and the University of Sydney China Studies Centre which providesgreater clarity on Chinese ODI into Australia and the behaviours exhibited by the organisations behind the deals.Asummary of this report was presentedChina’s investment by stateby KPMG Partner Doug Ferguson to theChamber’s Mining, Energy & CapitalInvestment (MINCAP) Committee. If you areinterested in such free briefings on energy investment,please register with Veronique.liu@austcham.com.hkChina’s investment inflows into Australia80% of investment is in mining Investment diversity hasbeen greatest in NSW116 deals completed (Sep 2006 to June 2012)Over the last six years (from September 2006 to June 2012)116 completed deals were recorded by the research partners,totalling USD 45.1 billion invested by Chinese enterprisesin Australian businesses. Almost 80 percent of this wasdirected into mining industries and a further 12 percentinto the oil and gas sector. Other industries barely rated interms of overall ODI volume. Investment diversity has beengreatest in New South Wales, where 30 percent of China'sinvestment volume was directed into real estate, agriculture,architecture, renewable energy, finance and other sectors.4 distinguishing characteristics of Chinese ODI in Australia1. Focus on ENR2. ‘Mega-sized’ deals3. SOE investor dominance4. Preference for investing with listed companiesThe average size of deals was larger in Australia comparedto other countries, with 19 of the completed deals having atransaction value of more than USD 500 million, and almosthalf having a transaction value of over USD 100 million each.Chinese investment in Australia: percentage of deals by sizeBased on number of dealsBig 4 Australian Banks active in Asia PacificMandated lead arrangers, Asia Pacific (ex Japan)2007 2010 1H 20121 ANZ Investment Bank State Bank of India State Bank of India2 Citigroup Bank of China ANZ Investment Bank3 National Australia Bank ANZ Investment Bank Bank of China4 Westpac Bank of Taiwan Westpac5 Commonwealth Bank HSBCCommonwealth Bankof AustraliaTo enquire about advertising, submit an article,comment or respond to austcham news, pleasecontact Karen at karen.wu @austcham.com.hkor call +852 2522 5054.An examination of the ownership structure of the 11 largestChinese investors and their investments in Australia resulted inthree preliminary observations. First, unlike other internationalinvestment locations for China, the majority of investment is bylong-established central SOE's with a considerable track recordof international activities.
SOE investment in Australia• Dominated by long-established central SOEs• Wide variety of entry strategies – dominated by M&A• SOEs are behaving like international companiesChinese companies already in AustraliaChinese investment by energy sectorCoal projects attracted the largest investment (approx50%) closely followed by gas (43%). Chinese SOEsoverwhelmingly the dominant investors, accountingfor 99% of investment. There are spillover benefits toother Australian industries as well, including finance,professional services and infrastructure.Although M&A is the most dominant form of Chinese ODI inAustralia, the variety of entry strategies used by large ChineseSOE's is the second notable point. And third, Chinese SOEs arebehaving similarly to other international investors in Australia.Mining and gas = 92% of deal value 2006-12China’s largest energy companies have rapidly increasedtheir stakes in Australia’s energy sectors in recent years.There were 24 deals completed over last 6 years witha total of US$12.8 billion. 6 of these deals were overUS$1 billion.Financing challenge• Australia’s total energy production (excluding-uranium)is expected to more than double by 2035.• Significant funding challenge. Australian Treasuryestimates more than A$200 billion will be needed onnew generating capacity by 2050• Foreign capital is vital. Chinese companies remain veryinterested in making long-term energy and infrastructureinvestments in Australia• Significant opportunities for an era of beneficial newstrategic partnershipsNext step forward• Chinese investment in Australia’s energy infrastructurenot equivalent to China’s share in offtake from coalmines and gas fields• Chinese investors want active participation with Chinesebanks increasingly active in international syndication• Trade relationship needs to be underpinned by anappropriate investment relationship to help secureAustralia’s long-term prosperity• Trade relationship needs to be underpinned by anappropriate investment relationship to help secureAustralia’s long-term prosperityThe full report can be found:http://www.kpmg.com/AU/en/IssuesAndInsights/ArticlesPublications/china-insights/Documents/demystifying-chinese-investment-2012.pdfSTART YOUR LTD. AT 12/12/12 FORcontact us: services@triple-eight.hk / +852 2527 0738terms & conditions: www.triple-eight.hkIN BUSINESSTIMING IS EVERYTHING
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Issue 149 - The Australian Chamber of Commerce in Hong Kong.

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