Why China is looking to increase agribusiness investment in Latin America

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China’s investment in Australian agribusiness has tripled in just a year as China strives to meet rising demand for high-quality food among its growing middle class.

In 2016, Chinese companies invested $1.2 billion in Australian agribusiness – three times 2015’s investment of $375 million – says a report from financial services provider KPMG and the University of Sydney.

The report, Demystifying Chinese Investment in Australia, says the investment was concentrated in the dairy, meat, seafood and wine sectors.

“Chinese investment in Australia’s agribusiness sector was driven by the rapidly rising demand for premium quality food as China’s middle-class population continues to expand,” KPMG Australia’s head of Asia and International Markets, Doug Ferguson, said on Monday.

The increase in Chinese investment also reflected the greater competitiveness of Australian produce in China following the China-Australia Free Trade Agreement, he said.

Major agribusiness deals included the joint-venture acquisition of the S Kidman & Co cattle empire by Hancock Prospecting and Shanghai CRED Real Estate, Moon Lake’s acquisition of Tasmanian dairy giant Van Dieman’s Land, and Inner Mongolia Fuyuan Farming’s acquisition of a 79 percent stake in dairy processor Burra Foods.

The KPMG and Sydney University report showed that from 2015 to 2016 Chinese investment in Australia across all sectors rose by 11.7 percent to $15.36 billion.

Commercial real estate attracted the greatest investment – $5.6 billion or 36 per cent – followed by large-scale infrastructure, at $4.3 billion or 28 per cent.

Fifty-one percent of the investment in commercial real estate went into residential development projects – up from 27 percent in 2015.

NSW attracted the most investment, with 53 percent, on the back of commercial real estate.

Victoria attracted 25 percent, and the remaining states each attracted less than 10 percent.

Australia has received a total of $US90 billion ($A120.3 billion) in investment from China since 2007, second behind the United States with more than $US100 billion ($A133.6 billion).

But Chinese investment in the USA, the European Unio, and Brazil in 2016 grew a lot faster but is experiencing pushback due to the reasons below.

The Chinese continue to pour money into other Australian businesses, like infrastructure, resources and real estate to the tune of $15.36 billion in 2016.

The figure is the highest it’s been since 2008 when Chinese direct investment reached its peak of $21.6 billion, according to a report from KPMG and the University of Sydney.

What does this all mean for the rest of Latin America? Australian’s, Canadians and other hot spots are nervous about the amount of Chinese investment that has already taken place in farmland and residential housing and will put political pressure on any government that allows many more large-scale rural purchases. This will force the Chinese to look to more risky markets for food security and that is why Latin America and Africa will benefit.

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and disposal.



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