Should Australia embrace foreign investment?

by YIP08 Sep 2017
Due to the public’s continued distrust of Chinese investment, former Prime Minister John Howard used two public forums in Sydney last week to urge Australia to recommit to foreign investment as well as open trade.

At the Symposium 17 by Commercial Real Estate event, Mark Wizel, national director at CBRE, interviewed Howard about the potential ramifications of discriminating against Chinese investment in Australia.

“In the long run, we would be crazy as a nation and it would be an act of self-destruction to ever become unfriendly​ ​towards​ ​foreign​ ​investment,” Howard said.

The conversation then moved on to how China has become entangled in the current cycle of public backlash, which Howard suggested other countries, such as the United States and Japan, had experienced in the past.   

The former prime minister made it very clear that Chinese investors still need to obey the existing rules around foreign investment.

“Chinese companies and Chinese authorities have to understand​ ​that​ ​there’s​ ​reciprocity​ ​in​ ​this​ ​openness​ ​and​ ​equal​ ​treatment​ ​of​ ​foreign​ ​investment,” he said.

The points raised in Wizel’s conversation with Howard were reiterated at the Asia Society Australia’s 20th Anniversary Dinner, when Howard suggested in his keynote address that the “cardinal rule” is that all foreign investment should be welcomed as long as investors abide by Australia’s rules and regulations.

Howard’s endorsement of foreign investment follows Beijing’s decision last month to ban certain types of investments by Chinese companies abroad, including casinos and defence technology. Other types of investments, such as hotels and overseas property development, were classified as “heavily restricted”.

Despite the dramatic changes to China’s regulatory environment, foreign investment still accounted for about one-third of all activity in Australia’s commercial real estate sector, with approximately $56.9bn of Asian outbound capital being directly invested into global property in the first six months of 2017. This is a 98.4% uplift on the $28.7bn allocated in the first six months of 2016.

Wizel, who is highly respected in the real estate sector for his knowledge of capital flows from Asia, said he was buoyed by the resilience of Australia’s key commercial property markets. He also welcomed the comments made by Howard, as they highlight Australia’s deepening relationship with Asia.

When asked what Australian commercial property’s biggest barrier for continued growth in Chinese investment was, Wizel said the industry needs to remain competitive due to global competition for Chinese investment.

“Australia cannot rely on its intrinsic relationship with China as a safety blanket for continued interest and growth in investment,” Wizel said. “The industry’s greatest challenge is ensuring that Australian commercial real estate remains competitive and attractive, particularly as the increasingly savvy and knowledgeable Chinese consumers discover more and more markets around the world, such as South America and parts of Europe.”

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