Miners out to pasture as Australian trade pivots with China-Exportimes

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Miners out to pasture as Australian trade pivots with China

Date : 2016-05-13 | From : Xinhua

While the once all-encompassing Australian miners were at the top of the trade food chain this time last year, another tough day of trading on the (Australia Stock Exchange) ASX is expected, after the iron ore price dropped its largest one-day fall in more than four years Monday on shivers over Chinese data.

The benchmark iron ore price fell to 104.70 U.S. dollars a ton, shoving the commodity into unfamiliar bear territory.

As the economy here swivels and twists in search of a new direction, Chinese investment in Australia has not been dominated by the mining sector for the first time since before the global financial crisis.

"That's a trend we expect to see continued and it explains why Victoria and New South Wales are outperforming Queensland and Western Australia," KPMG's China doyen, Doug Ferguson told local media.

New KPMG research shows Australia accounted for 8 percent of China's foreign investment compared with 12 percent in 2012.

There has been bold talk within government circles of a conclusion to the nine years of free trade negotiations between Australia and China, although nothing concrete has yet to solidify.

And 2014 marks the transition to a different era as new governments in both countries have settled in and are starting to interact, with many important meetings scheduled by our national leaders this year.

KPMG Demistifying China Report released this week has found that Chinese investment in Australia declined by 10 percent to 9, 115 million U.S. dollars in 2013, against a backdrop of an overall global increase in Chinese outbound investment during the year.

"We saw two very large investments in electricity transmission and LNG sectors that accounted for approximately 63 percent of total investment." Ferguson said in a note.

Australia also experienced a shift towards a larger number of small to medium sized deals, particularly in commercial real estate, driven by private Chinese investors.

Regulatory two-steps were also beginning to drag on investment into Australia's next boom sector agriculture.

Australian farmers must respond to new market pressures, including supply chain inefficiencies and investment needs at home, according to Australian Bureau of Agricultural Resource Economics and Sciences (ABARES) executive director Karen Schneider.

Schneider told an ABARES conference that 71 percent of the world's 75 percent rise in food demand by 2050 would come from Asia and almost half from China alone.

The latest World Economic Forum report showed Australia slipped from third on a list of least-regulated agricultural players to 20th in just four years. The blame is being pointed at environmental paranoia, described here pointedly as "green tape".

But Schneider said Australia had to look at its own backyard to get back in the game.

"We must increase productivity growth to remain competitive in growing markets. That will define the future success of Australian agriculture."

Australia narrowly lost its spot in 2013 as the world's most attractive destination for Chinese outbound direct investment (ODI) .

With the pressure building in the international race to secure Chinese capital, Australia's ranking for accumulated global ODI dropped to second position behind the U.S. but ahead of Canada, Brazil and Britain.

KPMG however remains "very positive about Chinese investment", with mining, real estate, agribusiness and infrastructure sectors benefitting.

China's premier suggested last week that the Free Trade Agreement with Australia will be accelerated, and that Chinese companies will invest over 500 billion U.S. dollars internationally over the next five years are very strong indicators of trade and investment growth.

Australia has traditionally received around 12 percent of this share of spending so the size of the prize is very significant.

On cue, shares in Australia's top miners weakened Monday on dramas over another possible slowdown in China and a shift in iron ore prices after official data, released Sunday, had China posting an unexpected trade deficit of 22.98 billion U.S. dollars in February, compared with a surplus of 14.8 billion dollars in the same month last year.

The adage remains - if China sneezes, Australia catches a cold.

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