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Why China?

Mainland Chinese investors have economic firepower and Australia is an attractive target for many reasons, not the least of which are a strong currency, the respect for rule of law, a stable economy and a country offering a peaceful (if not a slightly quiet) lifestyle.
When we established our wealth management company in Shanghai in 2006 (following our move there in 2003), the intention had been to attract Chinese investment in Australian real assets, principally new residential homes and apartments. Additionally, we gave access to a range of mutual funds in a number of geographic markets and sectors.
As a means of offering services to a wider range of local entrepreneurs, we acted as a broker providing access to SME finance and arranged Australian finance for Chinese investors purchasing property in Australia.

Interest in foreign property always eclipsed the take up of foreign mutual funds when the local A-shares” on the Shanghai stock exchange or their equivalents in Hong Kong known as “H-shares” offered such high returns. During the GFC the demand from our clients for overseas property investment remained relatively constant.

In 2010 we began to sense a changing appetite amongst certain high net worth individuals (HNWI’s). They began showing interest in going beyond the acquisition of residential investments and exploring the option of equity investments in the SME sector. Conversely at the larger end of town there was an increasing appetite for larger scale property developments and investments in mining or mining related companies.

The Chinese presence in Australia is growing across a wide number of sectors. There is substantial direct investment in property, a growing interest in larger scale mixed use property development and wide ranging investments in the rural sector.
There are significant inroads being made by the big Chinese banks in the Australian financial services market.
Five years ago there were two Chinese banks in Australia; now there are eight. Chinese banks are moving to the foreground, even as it appears the European banks are withdrawing.

Bank of China and Industrial and Commercial Bank of China (ICBC) are now the most active here in Australia. ICBC is China’s largest bank and its long-term strategy is to become the world’s largest retail bank. There are already ICBC ATMs in Perth, Sydney, Melbourne and Brisbane. In China, ICBC has 16,000 branches and 270 million customers.

The mainland Chinese customers as they come to Australia will obviously utilise their banking infrastructure.

We have clients currently doing due diligence on a range of SME businesses across the hospitality, real estate development, services, rural sectors. In the rural sector there is strong interest in beef stations, fruit farms and vineyards.

In Australia as in China, banks are a difficult call for most SME business owners; banks in both countries are hesitant and risk adverse when it comes to lending to the SME segment. The Chinese investors understand this and are keen explore opportunities to offer debt or equity financing to company owners in the Australian SME sector.

The incoming investors do not require majority control, they prefer to invest in sectors that are an extension of their expertise (and fortunes) in China.

Our Chinese clients are typically entrepreneurial, aged early 30’s to late 40’s; often university educated; their backgrounds are real estate development, manufacturing, IT with an emerging focus on the services sector. AUD 3-5 m are typical investment amounts, with AUD 100k set as a minimum threshold in the SME sector. AUD 20-50m at the larger end.

We prefer to match an Australian business with the background of the Chinese investor. The Chinese investor will typically not wish to be involved in the day to day management, deferring to local expertise, and is content with reasonable but safe returns on investment. ‘Return of their money’ in most cases is more important than ‘return on their money’.