Australian investment in China stalls despite thawing of relationship

Australian direct investment in China has more than halved since Anthony Albanese was elected in 2022, as firms remain concerned about heightened business risks and as the Chinese economic growth rate has slowed.

Prime Minister Anthony Albanese speaks to media in Chengdu on the final full day of his visit to China. Picture: Joseph Olbrycht-Palmer

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Australia’s direct investment in China has more than halved since Anthony Albanese was first elected in 2022, as companies remain concerned about heightened business risks and the Chinese economic growth rate has slowed.

The entire stock of Australian direct investment in China was only $1.6bn at the end of 2024, according to Australian Bureau of Statistics data.

Last year, Australian direct investment in China fell by more than 25 per cent from $2.1bn, according to the ABS. It has fallen every year since 2019, shrinking by almost 90 per cent from a peak of $15.5bn.

Chinese firms have also reduced their stock of direct investment in Australia every year since 2019, when China’s total stock peaked at $47.7bn. By the end of 2024 that had fallen 24 per cent to $36.5bn.

Even at that level, China has more than 20 times the direct investment in Australia compared to Australian direct investment in China.

The Prime Minister on Thursday said he wanted to see more direct investment into China when asked about the decline by The Australian.

Speaking at a press conference in Chengdu on the final full day of his six-night trip to China, the PM said there were both global and bilateral reasons for the fall since 2019.

“Covid had an impact on global economic investment, but also there were the specific issues during that term of the Morrison government,” Mr Albanese said.

“I want to see more direct investment here. It’s something that I’ve raised.”

Direct foreign investment requires high levels of trust because it entwines companies and their staff in the destination country and its legal system.

Despite the huge imbalance in investment levels, China’s government continues to complain about Australia’s foreign investment regimen, which it claims ­unfairly targets Chinese firms.

Premier Li Qiang on Tuesday repeated Beijing’s longstanding complaints in a meeting with the Prime Minister and senior Australian business figures.

“We hope that the Australian side will treat Chinese enterprises visiting Australia fairly and properly solve the problems encountered by enterprises in market access, investment review and other aspects,” Mr Li said.

On Thursday afternoon, the Prime Minister visited one of the rare investments by an Australian company in China in the past five years at listed hearing aid firm Cochlear’s factory in Chengdu.

He said it was a “great example” of the benefits of Australian investment to China.

“The idea that an Australian invention gives someone who has never heard the voice of their mum or dad, brother, sister – never heard the sound of airconditioning, the sound of the river, of birds tweeting. It’s amazing,” Mr Albanese said.

“We should be so proud of what we’re doing,” he said.

The Cochlear plant cost about $110m – almost a tenth of the total stock of direct Australian investment in China – and began production during the pandemic.

Sources at the world-leading company’s Chinese operation have told The Australian its operations were not affected by Beijing’s coercion campaign against the Morrison government.

The Sydney-headquartered company does not manufacture its most advanced products in China, a country with a long history of forced technology transfer.

Cochlear employs about 100 staff in China, a fraction of its total of more than 4000 staff, most of whom are based in Australia. But even at that modest level, it is one of Australia’s biggest employers in China.

Cochlear’s factory in Chengdu sits over the road from the headquarters of lithium producer ­Tianqi, which has invested more than $3bn in facilities in Western Australia.

In recent years, Tianqi has complained about its inability to increase its investment in Australia’s lithium sector, arguing that its expertise could help develop the critical minerals sector.

Mr Albanese did not visit Tianqi’s offices during his trip to Chengdu, the first by an Australian prime minister since Bob Hawke in 1986.

A senior representative from Tianqi attended the Australia-China business dialogue on Tuesday in Beijing’s Great Hall, where Mr Li and senior Chinese business figures raised concerns about Australia’s treatment of investment from China.

Chinese President Xi Jinping. Picture: AFP

For more than half a decade, Australia’s big four banks, led by ANZ, have drastically reduced their direct investment in China.

Former China bull James Packer’s Crown casino had earlier offloaded all its investment in the People’s Republic of China after the gaming company’s staff were arrested on accusations of breaking the country’s strict anti-gambling laws. Mr Packer has since called China “uninvestable”.

The fall is not unique to Australia. Foreign investment into China by wealthy liberal democracies has plunged since before the pandemic. Most Australian companies have also reduced their headcount in China as they have downsized operations and switched to local staff.

Even Treasury Wine Estates, owner of Penfolds, no longer has a China-based executive in the country, its largest market. Before the pandemic, Treasury had an executive based in Shanghai.

Security concerns have risen dramatically in the past decade for international firms operating in China. On Wednesday, a Chinese court sentenced a Japanese pharmaceutical executive to 3½ years in prison on vague espionage charges in a case that has troubled the China-based international business community.

The Beijing-based Astellas Pharma executive had been based in China for decades and was involved in the Japanese Chamber of Commerce in China.

He was arrested in March 2023 while on his way to boarding a flight back to Japan.

“The detention of Japanese ­nationals in China is one of the biggest obstacles to improving people-to-people exchanges and public sentiment between Japan and China,” the Japanese embassy in China said after the ­sentencing.

Both the Australian and Chinese governments have tried to keep the mood positive on Mr Albanese’s three-city visit, with each publicly downplaying ongoing irritants in the relationship.

Chinese media has been notably warm, emphasising the two countries’ economic ties.

The Australian business delegation that accompanied the PM during his afternoon in Beijing’s Great Hall of the People have also struck a positive tone while in China.

Bran Black, the chief executive of the Business Council of Australia, told the Australia-China CEO roundtable in Beijing that there were great opportunities to strengthen economic ties with China.

“We must be bold in seizing the many opportunities in front of us. It goes without saying that constructive dialogue between our two nations gives people confidence,” Mr Black said.