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Chinese Investment in Australia has Plunged Almost 50% in a Year

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Chinese investment has plummeted to almost 50% in a year as relations between Canberra and Beijing are souring and contributed to a rapid fall in investor confidence.    

Chinese investment in Australia had fallen from $4.8bn to $ 2.5bn between 2018 and 2019. It significantly fell for the third consecutive year, as stated by researchers from Australian National University.    

Chinese investors spent $15.8bn in Australia in the peak year of 2016. Last year’s figure was propped up by the $1.5bn spent purchasing Tasmanian baby formula processor Bellamy’s.  

Australian National University Professor Peter Drysdale, who leads the Chinese investment in Australia (China) database, a unique resource collating how much and where the money is spent, said Australia was experiencing much sharper falls in investment than the global trend.  

Chinese investors spent 9.8% globally, compared with 47% less in Australia over the same period.  

The bulk of the $50bn spent in Australia by Chinese investors since 2014 was before 2017.  

In 2017, then-prime minister Malcolm Turnbull flagged changes to Australia’s foreign security laws to counter what he described as foreign powers “making unprecedented and increasingly sophisticated attempts to influence the political process, both here and abroad”. While China was not singled out, it heralded a curdling of relations between the two countries, which have reached new lows in recent weeks.  

Drysdale said while falling commodity prices had made resources and mining -previously a favoured investment sector, less attractive, real estate purchases had also dropped, as the structure of Chinese investment in Australia had changed.  

The Bellamy’s purchase made the manufacturing sector king, but Drysdale said the steep decline in investment in Australia, as compared with the rest of the world, showed more was behind investor hesitancy in Australia.  

“Other things have been at work in the Australian environment, beyond the changes in the structure of it,” he said.   

“The investment environment may have seemed less attractive because of recent policy shifts and actions which may have been seen by the Chinese investors as negative signs, and there has been a deterioration of political relations, between the two countries which have had an impact as well.”   

Drysdale said he did not see the trend reversing anytime soon.  

“China is a major source of global foreign investment, and Australia relies heavily on foreign investment to grow its economy and strengthen its market ties. There is now diminishing space [for Chinese investment in Australia].”   

Relations between the Australian government and China’s ruling party have become increasingly strained over several issues.  

TECHNICAL OUTLOOK    

In the daily charts of AUD/USD, the price opened at 0.72 on Monday. The resistance still lies at 0.74, and we might not see the price going anywhere near the resistance for quite a while amidst the diplomatic tensions between China and Australia.   

Volatility is at a low on Monday morning as traders are just starting their week. As strategists are expecting for to bounce within support and resistance amidst the ongoing recession in Australia and conflicts with China, Aussie holds their ground and stays on the sidelines for now.  

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