Chinese firms eyeing Australian manufacturing and retail sectors

Chinese companies are looking to invest directly into Australia's manufacturing and retail trade sectors — rather than the mining sector, as would be expected, according to an HSBC survey.

The survey polled 250 Chinese companies that have built or are considering building a presence overseas, of which 17 per cent were large conglomerates.

The business-friendly conditions in Australia were a large part of the attraction to the companies, according to the survey.

Surprisingly, the manufacturing and retail trade sectors were the main targets for Chinese companies — rather than the mining sector, which has been the target for 80 per cent of Chinese investment to date, according to HSBC.

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"This diversification of Chinese investment beyond mining, particularly by middle-market and corporate Chinese businesses, aligns with the Australian economy's re-balancing towards non-mining sectors," said HSBC Australia head of commercial banking James Hogan.

"Of the Chinese companies in Australia, 52 per cent are in manufacturing, 28 per cent are in non-mining import/export industries and 20 per cent are in mining," according to HSBC.

Hogan said Australia is now China's seventh largest trading partner — but those trading links must be converted into investment links as well.

"While Chinese investment in Australia has been small to date, accounting for less than 3 per cent of Australia's total foreign investment in 2011, it has ranked in the top three sources for proposed investments coming through for approval in the past three years," said Hogan.

China's Commerce Ministry recently announced that China's outbound direct investment in the non-financial sector is expected to increase by 15 per cent in 2013 to US$77.22 billion, he said.

Australia's business-friendly environment is a big drawcard for Chinese companies, according to HSBC.

"Of the Chinese companies currently overseas, 61 per cent selected a market based on its growth potential, 50 per cent based it on low trade barriers, 43 per cent on the political landscape and 46 per cent on its favourable investment policies," said HSBC.

Australia's business-friendly environment is valued by Chinese countries that have already invested in Australia, but "it appears to be underestimated by those who have yet to make the move abroad", said Hogan.