In 2015 China's outbound M&A volume increased for the
sixth consecutive year to a record high of $111.9 billion in 2015,
breaching the $100 billion mark for the first time ever.
2016 is the Year of the Monkey – unsurprising a year which
is to be characterised by volatility. Despite overplayed
concerns about the Chinese economy, Chinese outbound M&A in
2016 is likely to continue to focus on acquisitions of mature
businesses in developed countries with advanced technology and
management best practices.
A YELLOW BRICK ROAD FOR AUSTRALIA
In 2013, President Xi Jinping announced a vision for a 100 year
economic development policy for China, and surrounding regions
– the One Belt One Road (OBOR
–一带一路). In 2015 OBOR initiatives
continued to gather pace culminating in the launch of the Asian
Infrastructure Investment Bank on 16 January 2016 and is expected
to lend $10 billion-$15 billion a year starting operations in the
second quarter of 2016.
While Australia is not technically on the OBOR map, the
acquisition of John Holland by China Communications Construction
Company and the Port of Darwin by Landbridge shows Australia can
benefit from this bold endeavour.
THE NEXT UNICORN - MAKING WAY FOR THE INNOVATION NATION
China's 13th Five Year Plan (to be finalised in March 2016)
lists technology as a key area of focus including expansion of the
online economy and the implementation of the Internet plus plan,
increasing network speeds and lowering fees. The Chinese
Government proposed to increase support for cyberspace innovation
in industries, and supply and logistics chains.
Chinese investors have previously focused on the acquisition of
commercialised tech companies. Chinese investors keen to acquire
technology are recognising the benefits of investment in start-ups
including Alibaba's US$220 million investment in Snapchat (a
Stanford Uni Start Up). A Chinese-backed US$713 million capital
venture fund Cocoon Networks established in January 2016 will seek
out British and European start ups with potential to expand in
China with a focus on fintech, medical devices and healthtech.
Australian start ups have previously had difficulties in
attracting Chinese investment with the focus on commercialised
companies predominantly located in the US. However, with a
frothy US tech market Chinese investors are also beginning to see
that Australia is a great source of ideas as the smaller market
size forces Australian start-ups to build viable business models
which are not predicated on blue sky projections and which are
capable of growth and can be readily scaled up to the Chinese
market. In 2015 Airtasker's $6.5 million capital raising
attracted Chinese based investors including Shanghai based Morning
In a bid to find the next Atlassian – a new Chinese
reality show – The Next Unicorn (a cross between the
Shark Tank and the X Factor) – has chosen two Australian
contestants to compete among 15 global entrepreneurs on the
This combined with the changes to Australia's significant
investor visa requirements in 2015 which require investment of at
least $1 million in Australian start-ups, we expect to see more
investment by Chinese venture capital funds in Australian
WHY THERE IS NOTHING LIKE AUSTRALIA
Chinese investors have set their sights on the fast growing
tourism industry as well, not only investing in developing
countries, but substantial sums have also been invested in the
tourism industry of developed economies including Sydney's
Hilton Hotel in George Street to Bright Ruby for $442 million and
Sunshine Insurance picked up New York five-star luxury hotel the
Baccarat Hotel for $US230 million as well as a Hunter Valley resort
with plans to develop a $100 million 6 star resort and second
championship golf course.
In 2015, the number of Chinese visitors to Australia surpassed 1
million for the first time and has more than doubled over the past
five years. Australian tourism takes in more than $35 billion
every year and more than a fifth of that comes from China, at $7.7
billion which is forecast to nearly double to $13 billion by
Growth in tourism (and occupancy rates) and a focus on cash flow
is likely to continue to drive Chinese investment and acquisitions
of hotels in Australia.
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