China and Australia two flags together realations textile cloth fabric texture
China and Australia two flags together realations textile cloth fabric texture

Triple threat: Chinese investment bombshell

CHINA'S investment in Australia in three times higher than previously believed, with "phantom investment" and "empty shell companies" hiding the real figures, a shock new report has found.

The Productivity Commission review into foreign investment in Australia made the claim.

While it is recorded as having $40 billion in foreign direct investment in the country, it said this was likely "three times" higher when the ultimate owner of the companies investing was considered.

Shell companies set up via the Cayman Islands, British Virgin Islands, Ireland, Switzerland and other countries are where the "phantom investments" are coming from.

 

A Chinese flag flies at the Embassy of the People's Republic of China in Canberra. A new report has found Chinese foreign investment in Australia is likely three times higher than currently reported. Picture: Sam Mooy/Getty Images
A Chinese flag flies at the Embassy of the People's Republic of China in Canberra. A new report has found Chinese foreign investment in Australia is likely three times higher than currently reported. Picture: Sam Mooy/Getty Images

It has sparked calls from Queensland MPs for more stringent controls to stop companies hiding where investments are really coming from.

The report found that much of the detail collected by statistical offices was based on the "immediate owner", where the money directly came from, rather than the "ultimate beneficial owner", where the money ends up.

While exact investment figures are all but impossible to determine, it found that "inflows into Australia with ultimate beneficial ownership by an investor in China could be averaging about three times as high over recent years".

While China is not the only country which uses this method, there have been suggestions there's been a spike in activity as Chinese private companies seek to skirt their own domestic investment restrictions.

Herbert MP Phil Thompson, a member of the Parliamentary anti-Chinese influence group known as the Wolverines, said there needed to be stricter controls to "protect national sovereignty".

"We must adapt with rules and regulations to ensure that when nations invest here we know who it is and it's on our terms," he said.

"It does test our sovereignty because we don't know who is actually investing here."

Dawson MP George Christensen said Australia was "hamstrung" if it didn't have the full picture on investment, saying it "sets alarm bells ringing".

Herbert MP and “Wolverine” Phil Thompson says more needs to be done to protect Australia’s sovereignty from foreign investment. Picture: Alix Sweeney
Herbert MP and “Wolverine” Phil Thompson says more needs to be done to protect Australia’s sovereignty from foreign investment. Picture: Alix Sweeney

China relations expert Jeffrey Wilson of the Perth USASIA Centre said if China's investment was triple what was reported, it was still well below the US and similar to the UK and Japan.

He said foreign investment in Australia generated one-in-six dollars of private investment, so putting too many hurdles up would risk jobs.

"The risks are absolutely real, it's happening and we've got to do something about that. But If you make it about running the gauntlet to invest, then that's a lot of jobs when there's not many going around," he said.

"It's a risk, but we have good defences against that risk."

He said the much of the undetected investments would be real estate investments and small businesses, with the Foreign Investment Review Board effective in vetting major investments, particularly with national security aspects.

The US is the top foreign investor into Australia at $214 billion, followed by Japan at $106 billion and the UK at $99 billion, while China is the fifth largest.

 

 

Originally published as Triple threat: Chinese investment bombshell



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