Is bumpy Chinese growth cause for alarm?

Peter Godfrey
by |
Following reports earlier this week that the World Bank had lowered its expectations of Chinese economic growth for 2014, local commentators have revealed how this might affect Australian deals activity.

The bank announced that it had revised its Chinese economic growth expectations from 7.7% down to 7.6% after industrial production, investment and retail sales all slowed down.

Despite this slower than expected start to the year confirming that the Chinese economy is in fact beginning to slow down, Belinda Fan, partner at Herbert Smith Freehills believes Australia remains in a strong position and is likely to see continued investment from China. 

“There has been a small reduction in Chinese growth, but in terms of absolute numbers there’s still an incredible amount of money being generated,” Fan told Australasian Lawyer.

“The Chinese government is still very vocal about overseas investments in certain areas, and Australia is very well positioned to take these on.”

Fan explained that Australia was particularly well positioned as a target for further Chinese investment as it is very well-endowed with resources that are the focus of China.

“Mining is definitely an area that will continue to be heavy in terms of investment, particularly iron ore and gold,” Fan said. 

“Agribusiness is also of great interest and we have already seen a lot of approaches and interest from the Chinese in that area.” 

Fan believes that Australian lawyers are becoming better at working with China on deals and that the growth in experience is coming from both ends.

“The Chinese are increasingly becoming sophisticated about their overseas investments,” Fan said.

“Lawyers are now meeting in the middle.  The Chinese are understanding how things are done in Australia, and the Australians are learning that there are certain ways of communication and cultural respect required when they deal with China.”

In 2013 Chinese investment in Australia was not entirely concentrated on the mining sector, with a shift towards a larger number of smaller to medium sized deals and a larger share of private Chinese investors.

As previously reported in Australasian Lawyer Australia was second only to the United States for Chinese M&A activity in 2013, in terms of both the volume and value of deals.

Australia was also the target country in two of the year’s ten highest value outbound deals for Chinese companies.

In June last year, the Hong Kong-based State Grid International Ltd purchased a 60% stake in Singapore Power International’s Australian assets, worth US$2.8bn,earning it a place in China’s top 10 outbound deals for the year.

In the same month, the China National Offshore Oil Corporation also bought an interest in the Queensland Curtis LNG project for US$1.9bn.

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