With the Australian Dollar going south should Chinese Investors continue to pump money into our economy?
Chinese buyers of Australian real estate and commodity companies have lost about 30 per cent – more than $12 billion – off their local investments in the last three years.
Chinese citizens invested slightly more than $40 billion in 2012 and 2013, purchases and partnerships tracked through the Foreign Investment Review Board (FIRB) show.
However, the falling Australian dollar, which has shed 34 per cent since the end of 2012 by falling to about $US70¢ from $US1.04, has carved 30 per cent off these investments as it has fallen against the yuan, which is pegged to the US dollar.
The Chinese yuan is traded, but controlled by Beijing, which sets the middle point of its trading range each day. It fell by slightly more than 3 per cent in early August after its midpoint was lowered.
“Based on FIRB approvals, $18.8 billion was invested in the resource sector in the 2012 and 2013 financial years,” David Chin, managing director of investment group Basis Point, said.
“During that two-year period, the All Resources Index averaged 4356. Today, the index is 2816, equating to a loss of 35 per cent if the index is used as a gauge of investment performance.”
Chinese investors have contributed $92.6 billion to the national economy in the last three years through investment and migration, statistics show.
About 24 per cent of that total – some $22.5 billion – comes from real estate purchases.
Another $9.2 billion comes from portfolio investment; $4.1 billion from students and slightly more than $6 billion through the Australian government’s Significant Investor Visa program, which grants a four-year provisional visa to people who invest at least $5 million in the country.
An additional $12.3 billion comes from the immigration of almost 16,000 Chinese citizens.
Chinese investors who bought off-the-plan apartments in 2014 have watched their property investments climb more than 40 per cent, mostly because of growing property prices and the combined currency gap.
“To be fair, investors from the US have lost as much money due to the Australian dollar weakness and assuming their foreign exchange risks were not hedged,’ Mr Chin said.