Fears of China buying up the country run deep, with opportunistic politicians and commentators long showing a willingness to not let “facts” get in the way of the truth. And the facts are that: China’s land interests are predominantly leasehold, it owns just 2% of foreign investment stock and is subject to a much lower threshold test. With the Australia-China relationship at a low ebb, it is time to call out this destructive tactic, writes James Laurenceson.
Alarm is reportedly rising among the public about Chinese investment in Australia. According to the 2019 Lowy Poll, 68% of Australians said the government is “allowing too much investment from China”. This was up from 50% in 2009 when the question was first asked.
One public figure feeding this alarm is George Christensen, the National Party member for Dawson in Queensland.
In April, Christensen authorised the setting up of a website titled China Inquiry. He uses it to declare: “It’s time to speak up on China’s economic infiltration of our nation.” His video “Enough is enough” is from Christensen’s website:
Readers are told: “Communist China is Australia’s largest foreign investor. They use their investments in Australia to guarantee a supply to China, also off-shoring both profits and tax. Government-owned businesses also do the bidding of the Chinese Communist Party in Australia.”
He adds: “There is no single set of data that systematically details Communist China’s investment in Australia. The actual investment amount is completely unknown.”
Facts are freely available
If the amount really is “completely unknown”, on what basis does Christensen confidently assert that China is Australia’s largest foreign investor?
The reality is that there are several reputable data sources available. And none points to China being the leading foreign holder of Australian assets.
The Australian Bureau of Statistics (ABS) finds that in 2019 China accounted for just 2% of the total foreign investment stock in Australia.
The US was the standout No.1 with 26%. China lagged in ninth place, behind Belgium, Singapore, Netherlands, Luxembourg and others. Even if Hong Kong SAR is included in the Chinese total, the aggregate would still only be in fifth spot.
If Christensen doesn’t believe the ABS, perhaps he’ll defer to the US embassy in Canberra, as well as nearly every visiting senior American political leader. These sources routinely tout the ABS numbers as definitive evidence that Washington, not Beijing, is “Australia’s most important economic partner”.
In 2018 the ABS published the findings of a survey of majority foreign-owned companies in Australia. Covering the period 2014-2015, the ABS identified 2039 majority US-owned firms. In comparison, there were just 204 majority China-owned firms, placing China at 10th on the list of Australia’s most prevalent foreign owners.
Chinese investment declining
And rather than a surge of Chinese investment in Australia in recent years, the value recorded in 2019 was the lowest annual total since 2007, according to an annual accounting by KPMG and Sydney University.
The latest annual report of the Foreign Investment Review Board (FIRB) states that in 2018-19, approved investment from the US reached $58.2 billion. China was in fifth place with $13.1 billion. FIRB data also likely understate the amount of American investment because a privately-owned US company can buy Australian agricultural land or an agribusiness with a value of up to $1.2 billion without Canberra’s approval. This amount is 80 times greater than the threshold that applies to equivalent Chinese investors for agricultural land and 20 times greater for agribusinesses.
Homing in specifically on Australia agricultural land, data collected by the Australian Tax Office yields a headline that in 2018-19, China and the UK were the two largest foreign holders, each with a 2.4% share of the total.
Agricultural land is leasehold
But drill down deeper and it’s revealed that 91% of the agricultural land held by Chinese interests is actually leasehold. For freehold land, China follows the Netherlands, the US and the UK.
FIRB boss David Irvine also observes that leasehold land is, on average, less productive than freehold land. If China’s share of Australian agricultural land were expressed in terms of value rather than area, it would be significantly less than 2.4%. Analysis by Rabobank points to that value likely being between 1 and 1.5%.
Further, the criteria used by the Tax Office to determine land as having Chinese interests is if the holder is a corporate entity with a Chinese equity share of 20% or more. By far the largest land holdings with Chinese interests are those held by Australian Outback Beef Ltd, totalling 7.92 million hectares, or 87% of the Chinese total. But, in fact, Outback Beef only features 33% Chinese equity. Gina Rinehart’s Hancock Prospecting holds the majority 67% share.
Relations continue to deteriorate
And last week’s 2020 Lowy Poll shows that attitudes towards China have also soured among the Australian public: just 23% trusted China to “act responsibly in the world”, a nine point fall on an already low 32% in 2019.
China cannot escape significant responsibility for the deterioration. As recently retired senior Department of Foreign Affairs and Trade official Richard Maude noted in a well-received essay last month, “No Australian government can ignore the immense clash of interests and values that today’s China creates and the limits this inevitably puts on the relationship.”
But to the extent that Australian perceptions have deteriorated and mutually beneficial engagement has suffered because the facts of the bilateral relationship have been distorted or wilfully ignored, such as those around Chinese investment, often-times the blame lies at home.
This article was first published in Pearls and Irritations and is republished with permission.