CHINA’s boom cycle of investment in Australian and global agriculture appears to be over.
According to KPMG and the Business School at the University of Sydney, a sharp drop occurred in both the value and number of transactions by Chinese investors in Australia last year, including agriculture.
The ‘Demystifying Chinese investment in Australiaanalysis of Chinese foreign direct investment (ODI) in Australia in calendar year 2019.
One of the authors is KPMG Doug ferguson, who is also the president and chief executive of New South Wales for Asia and the company’s international markets.
He said there was limited activity or interest in primary agricultural investment from Chinese foreign investors this year.
“Apart from the acquisitions of a few characterful cellars, it’s calm. The key factor is the lack of international travel, but most Chinese investors are focusing on the later stages of the value chain, namely premium branded and packaged products, ”Ferguson said.
Danny thomasCBRE’s regional agribusiness director said Chinese investments were not over, but China was certainly absent from the market right now.
“But previously, the presence of Chinese investors in the Australian market was vastly overestimated. People kept saying how active they were, but they weren’t that active. They just got more attention than investments from Canadians, Europeans or the UK, ”said Thomas.
Has there been a change in sentiment since COVID-19? It is certainly more difficult for the Chinese to get money out of mainland China, and it is more difficult to import it into Australia with the tightening of Chinese financial regulations.
Chinese foreign investments must be approved by the State Administration of Foreign Exchange (SAFE) of the People’s Republic of China. The administrative agency is responsible for drafting the rules and regulations governing the activities of the foreign exchange market and managing the foreign exchange reserves of the state.
And then there’s the Australian Foreign Investment Review Board which looks at major overseas purchases – whether a foreign investor is an individual or backed by the Chinese government or a state-owned company, as well as transfer pricing risk.
Mr Thomas said a potential Chinese investor recently told him he was concerned about the trade tensions between Australia and China at the moment and decided to stay on the sidelines.
The reasons for the decline were cited by the KPMG report as “a lot, and no country or problem is responsible.”
- Tighten Chinese ODI regulations
- Chinese state-owned enterprises’ investments are moving towards less risky and better quality investments
- China’s negative perceptions of stricter Australian government investment regulations.
The report found that Chinese investment in 2019 in Australia (all sectors, not just agriculture) fell 58.4% from $ 8.2 billion in 2018 to $ 3.4 billion – more faster than in any other western country, including the United States.
“Chinese inward investment fell to its lowest result in a decade, with Australia receiving just under half of the investment received by the United States (part of which halved in 2019), but more than the Canada, “the report says.
China’s largest investment in Australia in 2019 was Mengniu Dairy Co’s acquisition of Bellamy’s Australia Ltd (organic baby milk and food) in Tasmania for $ 1.5 billion, which represented 43.7% of China’s total investment in Australia that year.
It also made food and agribusiness the biggest beneficiary in the sector with 44% of the annual total. As a result of this unique deal, Tasmania in 2019 received the highest percentage of Chinese investment in all regions for the first time.
The only other beneficiary of Chinese food and agri-food investments in 2019 was Victoria with just 3% or $ 14 million, with the remaining 97% invested in the state being concentrated in commercial real estate.
In 2019, the report found that there was no Chinese investment in the Northern Territory. Queensland’s share was mainly in the commercial sector, in Western Australia it was in mining and 100% in New South Wales was invested in commercial real estate and service industries.
Doug Ferguson of KPMG, however, said there were a large number of Chinese companies established and operating in Australia that are expected to continue to invest or divest, and boost local transaction activity and two-way trade.
Danny Thomas of CBRE agrees, saying the Chinese are always keen to invest in various parts of Australia’s agricultural supply chain.
“There aren’t a lot of high net worth mainland China based investors active in the market right now,” he said.
“However, there are a lot of existing Chinese participants in Australia who are looking to expand and change their business, and who are considering setting up in a neighboring holding company.”
“Although there is no obvious new blood, capital flows continue to flow out of Hong Kong and Chinese money is coming from Singapore. However, the investment is no longer as before by an effort of imagination, ”said Thomas.
Chinese sales in 2019
In July last year, one of China’s biggest investors in Australian land and cattle, Rifa Salutary, decided to relocate its agricultural production activities to Australia.
Rifa, the Australian arm of Chinese group Zhejiang Rifa Holding, began its Australian agricultural investment with its first purchase in 2014.
After five years, the operation consisted of 14 demonstration properties (consolidated into five main operational centers in northern NSW and Victoria), covering 44,000 ha of prime red meat production land and around 20,000 quality cattle.
Last year, Rifa Salutary Director and Vice Chairman of Rifa Holding Group, Bobby Jiang, told Beef Central that the company believes now is the time to capture value through the execution of investment programs. and targeted improvement across the portfolio, as well as the underlying programs. value growth.
The next month, in August 2019, wealthy Chinese businessman Xingfa Ma decided to sell his Wollogorang and Wentworth cattle farms in the Gulf of Carpentaria after four years of possession.
In July 2015, Mr. Ma, founder and chairman of the Tianma Bearings group, paid $ 47 million, including 40,000 head of cattle, for the 705,198 ha lease and pastoral crown straddling property in the Territory of North and Queensland border.
In March 2020, McMillan Pastoral Co of Cloncurry, which owns the neighboring country, purchased the station for $ 53 million on a walk-in basis with 30,000 Brahman cattle and a full plant at the station.
The “Demystifying Chinese Investment in Australia” report does not expect large-scale investments from Chinese new entrants to continue in the short to medium term, as the national economic and health effects of COVID are devouring for governments and Chinese and Australian companies.
“With Chinese and Australian borders closed in the medium term and flights between Australia and China limited to transporting Chinese and Australian citizens to their homes and limited dedicated air cargo for perishable or urgent supplies, the conclusion of new investment agreements and due diligence activity has been operationally disabled, ”the report said.
Chinese acquisitions 2020
Interestingly, two large Victorian rural properties were bought by Chinese interests this year.
In March, just before the COVID restrictions, Tianyu Wool, one of the world’s largest buyers of Australian fleece, paid around $ 25 million for the historic Victorian-era western pasture property Mawallok which was offered to the market for the first time in 172 years.
The 2,349 ha property is located 45 minutes west of Ballarat and approximately two hours northwest of Melbourne.
In 2014, he paid around $ 20 million for the historic Real estate Lal Lal in Ballarat – a 2,000 ha merino sheep breeding and wool producing property with over 16,000 head.
In September, Chinese firm Harvest Agriculture paid around $ 60 million for one of the largest land holdings within 37 miles of Melbourne.
A wholly-owned Australian subsidiary of Guangxi Investment Co Ltd, Harvest Agriculture obtained the 5,071 ha Yaloak Domain in Ballan. Currently operated as a productive crop and grazing enterprise, it also represents an unprecedented land reserve opportunity with exceptional future potential (possibly as a subdivision).
As recently as yesterday, speculation arose that Chinese owners could close the doors to their property of Australia’s largest dairy farm, the historic Van Diemen’s Land Company of Tasmania.
Rumors suggest that the owner of Chinese businessman Xianfeng Lu could position himself to offload the ailing 7,000 ha aggregation near Woolnorth, in the upstate, which has around 18,000 dairy cows in 25 farms.
Mr. Lu’s Moon Lake Investments bought Van Dieman’s Land Co in 2016 for around $ 280 million, beating TasFoods’ $ 250 million offer by the eleventh hour.