Alistair Nicholas examines four steps for successful Chinese investment into the Australian market
China’s government officials and moneyed classes are probably buzzing with excitement this morning about the prospects of flooding the Australian market with billions of dollars in investment following comments in Hong Kong yesterday by the head of Treasury, Dr Martin Parkinson.
However, they would be well advised to take a deep breath and plan a careful entry strategy to the Australian market.
Parkinson was explaining that China’s share of global investment could rise from three percent to around 25 percent given its rising foreign exchange reserves. Parkinson said these reserves could triple to $16 trillion by 2030. He said that Chinese investment stands at just “one percent of the total stock of foreign investment in Australia”.
He went on to tout the benefits for Australia and two-way trade and investment flowing from more Chinese investment into the economy. He also promoted the benefits of Sydney becoming a “natural destination” for trade in renminbi, China’s currency.
Still a long haul
But despite the optimistic outlook of the Treasury chief, Chinese investors will have their work cut out for them. Although Australia is a relatively open market for investment, including from China, there is growing concern amongst the Australian public over Chinese investment. Australians are especially concerned about Chinese investment into sensitive areas such as resources, energy, agriculture and property.
Indeed, Federal Parliament’s House Economics Committee has been asked by Treasurer Joe Hockey, Parkinson’s boss, to look into foreign investment in residential real estate. According to members of the committee I have spoken to the request is the result of growing public concerns about Chinese investment in particular into residential property in Australia’s main cities.
Although the Committee is likely to find that Chinese investment into the Australian property market is small and having a minuscule impact on prices, it does not necessarily mean things will become easier for Chinese investors. As long as the Australian public feels uneasy about the levels of investment and the sectors targeted, Australian politicians will tread carefully.
Therefore Chinese investors into the Australian market will need to take steps to win the hearts and minds of average Australians. To do that they will need to employ sophisticated public affairs strategies to assuage the public of their concerns about the investments being made and to demonstrate the economic and social benefits of those investments.
So how do you succeed?
What can Chinese investors do to succeed in Australia? Here are some tips:
1. Engage with politicians across all levels of government – federal, state and local. Australia is not China where a nod from the Central Government means all other levels of government will fall in line. In Australia, party and parochial interests can and do mean the difference between success and failure of investments. Even Australian companies are atuned to these nuances. Chinese investors need to understand the political dynamics and make the connections across the board to succeed;
2. Engage with the shareholders and employees of target companies from the outset of an investment decision. It is critical that Chinese companies obtaining the support of shareholders and employees if they are investing in a company or assets. Failure to do so could result in a flight of local shareholders and employees. This would certainly lead to a devaluation of the stock. If Chinese investors could win the support and commitment of other shareholders and employees that stock would hold its value and possibly even rise.
3. Engage with local communities around an asset that is being targeted. This is particularly important for Chinese investors into the resources and agriculture sectors. As those assets are likely to be located in smaller, remote areas there is likely to be greater concern about how a Chinese investment might change the nature of the business and impact the local community. Because people fear what they don’t know, Chinese investors targeting investment in these regions need to work doubly hard to ensure local communities understand them ahead of concluding an investment.
4. Engage with indigenous communities where appropriate. This is certainly important where investments into resources and agriculture are concerned given that those assets are usually on or close to Aboriginal lands. Chinese investors will need to understand the profound spiritual connection Australian Aborigines have to the land in order to assuage their concerns and win their support for an investment.
Just as Australian companies needed support and advice when we entered the Chinese market after it opened to foreign investment in 1979, Chinese companies seeking to invest more into the Australian market would be well advised to seek similar support and advice to ensure successful engagement with Australian society.
Alistair Nicholas is a Senior Advisor in Weber Shandwick Australia’s Government Relations, Public Affairs and Crisis Management Practice. He was an Australian Trade Commissioner and a Trade Advisor in the Australian Government, and he spent 13 years working in Public Affairs in China before returning to Australia last year.