Chinese Direct Investment in Australia — a Perspective

Abstract

Substantive mainland Chinese direct investment into Australia emerged from 2008. The investment has complemented Chinese portfolio investment in Australia and has evolved from an initial focus on resource based activities to a wider portfolio including real estate, transport and manufacturing. While mainland Chinese investment is now substantial, the main source of foreign direct investment to Australia remains OECD economies, particularly Japan, the United Kingdom and the United States. The nature and level of future Chinese direct investment abroad will be influenced by firm-specific factors such as resource seeking investments towards market seeking and strategic asset seeking as Chinese firms move towards the global technology frontier and as China increases its global economic and strategic footprint. The (net) levels of funds available for foreign direct investment will be conditioned by broad economic factors such as the demand on saving to build local per-capita capital stocks towards OECD economy averages. Future direct investment flows will also be influenced by privacy, strategic and resilience concerns of countries in the global market place for capital. The balance struck in trade-offs between these concerns and trade concerns will affect the pace and direction of technological and organisational change in Australia, and ultimately economic growth, material living standards and the quality of life. The management of those trade-offs will be influenced by the responses of other countries over which Australia may have little influence.