Report: Policy shifts drive investment fall

As China's outbound investment expands and more countries welcome Chinese capital, its investment in Australia has fallen sharply, exposing a widening gap between strong trade ties and weakening investment flows.

Analysts say the decline could undermine Australia's broader national interests by limiting access to leading Chinese technologies, underscoring the need for stronger political leadership in Canberra.

A recent report by the Australia-China Relations Institute at the University of Technology Sydney found that Chinese direct investment stock in Australia has dropped by A$11 billion ($7.83 billion), or nearly 25 percent, from its 2019 peak of A$47 billion. China now accounts for less than 3 percent of Australia's total foreign direct investment stock.

James Laurenceson, the institute's director and co-author of the report, said the focus should go beyond individual investment proposals.

"The overall trend is that Chinese investment in Australia is going backward at the same time as other countries are welcoming more and more Chinese investment, and when more and more Chinese companies are the technology leaders in their fields," he said.

"The trend is working against Australia's broader longer-term economic security," he added.

According to China's Commerce Ministry, the country's outward investment maintained steady and orderly growth last year, with investments increasing in Africa, Europe and Asia. Chinese investments in Belt and Road partner countries reached nearly $40 billion in 2025, up 17.6 percent year-on-year.

The report said the value of new Chinese investments approved by the Australian government had fallen so low that quarterly reports of the Foreign Investment Review Board often no longer include China, which has dropped out of Australia's top 10 foreign investors.

The board is a non-statutory body that advises the Australian treasurer and government on foreign investment policy and administration.

Based on industry consultations and market interviews, the report identified policy changes in Canberra as the decisive driver of the decline.

It said more Chinese investment proposals were increasingly regarded as contrary to the national interest as Australia's foreign investment screening process placed greater emphasis on security concerns and expanded the range of assets, sectors and locations deemed sensitive.

Wide consensus

The report found overwhelming consensus among industry participants that the current screening process "lacks clarity, transparency and predictability", with negative implications "not just for the businesses directly affected but also Australia's broader national interest".

Laurenceson said Chinese businesses told researchers they did not feel their investment was welcomed by the Australian government, despite Canberra maintaining that it still supports proposals deemed to be in the national interest.

"The problem is that it is not clear to potential investors what might be approved or how they could structure their proposal to get approval. Given the time, cost and uncertainties involved, many Chinese investors are just looking elsewhere," he said.

Similarly, a joint report by KPMG Australia and the University of Sydney showed that Chinese investment in Australia fell 28 percent last year to $623 million from $862 million in 2024, with only 24 completed transactions recorded in the year.

In a recent commentary published by the Australia-China Relations Institute, Wei Li, a senior lecturer at the University of Sydney Business School, said the continued decline reflected "changing investor confidence, geopolitical risk and narrower commercial channels" between China and Australia.

The Australia China Business Council said Australia was missing an important opportunity to attract Chinese investment.

China could play an important role in supporting Australia's economic prosperity, especially in renewable energy and decarbonization projects, the council said.

The investment downturn contrasts with the resilience of bilateral trade ties. The Australian Bureau of Statistics said Australia's exports to China reached nearly A$200 billion in 2025, accounting for about 30 percent of total exports. China remained Australia's largest trading partner for the 16th straight year.

"It's positive ... that trade flows remain strong, but investment can further support trade, as well as a conduit for world-leading technologies being deployed in Australia-based operations," Laurenceson said.

"A healthy Australia-China economic relationship would see both trade and investment on a more positive trajectory," he said.

xinxin@chinadaily.com.cn