Australian Prime Minister Kevin Rudd’s visit to China in April not only deepens the China-Australia relationship but also further opens the door for outbound investment. Seamus Cornelius, partner at Allens Arthur Robinson, said that as the Chinese government lifts some legal boundaries and the country has high demands for raw materials, the trend for local enterprises to make outbound investments in Australia will continue.

“Over the past few years, many of the procedural and legal restraints in China that previously hindered outbound investment have been removed. Given the strategic importance to China of securing its supply of key raw materials, none of the major PRC companies have any difficulty in obtaining the required approvals for outbound investment,” he said.

Cornelius also said that the importance of the current trading relationship between the two countries is a consequence of their past trading relationship rather than a cause of their behaviour. While China provides mechanical products, hi-tech products, clothing and textiles, Australia exports to China major raw materials such as iron ore, aluminium and wool. All of these are critical to China, where the natural resources cannot keep up with the country’s increasing economic growth. Even five years ago, there was already a significant increase in outbound resources and energy investment work for major PRC companies, Cornelius said.

Recent market instability has made investors wary of making investments, but Cornelius is positive about China’s outbound investment trend.

“Commodity prices are still strong. The recent downturn in the stock market and tightening of the credit markets has simply made valuations more attractive for buyers and made funds flowing from China into resources projects more keenly sought after,” he said.