Chinese investment to continue

CHINESE investment in Australia’s minerals sector isn’t expected to peter out any time soon, according to one analyst who believes there will be more Chinese interest in Australia’s mid-cap mining sector.
Chinese investment to continue Chinese investment to continue Chinese investment to continue Chinese investment to continue Chinese investment to continue



The Beijing Axis founder and group managing director Kobus van der Wath told delegates at the Global Iron Ore & Steel Forecast Conference held in Perth that Chinese investment would continue given Australia’s proximity to China and that commodities such as iron ore and coal were in such hot demand by Chinese industry.

“Direct investments from China will continue, they won’t end anytime soon,” he told delegates.

“Australia will see more of that, especially when the policies are more relaxed to allow more Chinese investments here.

“More deals will happen in Australia in the mid-market, but slowly moving perhaps into bigger deals initially taking minority stakes moving to miner control later on.”

He said overseas investments by the Chinese would become more diversified across industries and geographies, with steel companies making more investments abroad to ensure security of supply.

However, he also warned that the Chinese were becoming choosier and more cautious with their investments in new jurisdictions.

“They are stopping looking at medium-sized and small-sized assets; they prefer to look at large assets that can be developed efficiently,” he said.

“They are very cautious because they have been burned on a number of investments in new jurisdictions so they are very, very careful about how they work.”

Van der Wath said Chinese companies preferred joint ventures and partnerships in greenfield investments rather than taking whole ownership.

He also said there was a lot of potential for Australian miners to partner with the Chinese to explore iron ore in Africa.

“I think since the Chinese have very little experience in [Africa] and Australian companies have more experience of exploration and new mine development in mining jurisdictions including Africa, it is a very good partnership for both sides,” he said.

“[The reason for this is] the very high risks in places where they haven’t operated yet, where they cannot predict the costs.”

The news comes after reports of a push by the Chinese government to get local companies to step up overseas investments in iron ore with the goal of having half of China’s iron ore imports come from Chinese-invested mines.

According to a recent report by PricewaterhouseCoopers, the trend of Chinese outbound investments, which has been a key part of recent investments by the top-tier Chinese steel companies, will extend downwards to include more companies from the second layer of state-owned enterprises at a provincial level.