Australia missing out on China’s $100bn clean energy boom: report
Lack of clarity for foreign investors costs billions that could go towards the green transition, a think tank has warned.
Local firms are missing out on the US$100 billion “tsunami” of Chinese investment that could spur the clean energy transition and realise the government’s Future Made in Australia plan, experts have said.
In a new report, think tank Climate Energy Finance (CEF) said the wave of investment opportunities from the world’s second-largest economy was mostly bypassing Australia and going to markets in Europe, Asia, Africa and South America instead.
It said Chinese leaders in “clean tech” such as solar, wind, batteries and electric vehicles, were being discouraged from investing despite Australia’s abundance of natural resources.
“Australia’s current formal posture with respect to Chinese firms’ investment is opaque, disincentivising investors, meaning investment into Australia is weak relative to the rest of the world, and putting at risk the enormous opportunity for partnership with private Chinese companies where there is potential for significant value-adding onshore, leveraging Australia’s Future Made in Australia strategy,” the report said.
The Future Made in Australia plan, announced in May’s budget, includes a raft of industrial policies aimed at improving local manufacturing and speeding up the transition to net zero.
Analyst Xuyang Dong, one of the report’s co-authors, said investment from Chinese firms brought a range of benefits including technology, expertise, capital and experience.
“Australia should work actively with China, transforming our historic dig-and-ship economy in order to not be left behind in the global race-to-top on energy transition,” he said.
“Joint ventures with China have enormous potential to boost Australia’s decarbonisation trajectory.”
The “tsunami” of investment reflected China’s strategy to “globalise its footprint, extend its geopolitical influence, circumvent tariffs, secure its supply chains, and build new and developing domestic markets”, the report said.
CEF estimated that Chinese companies had invested over US$100 billion since the start of 2023 across at least 130 major clean tech transactions.
But Chinese FDI in Australia was at a multi-decade low with only $613 million in 2023, and down from $1.42 billion in 2022.
The investment slump was attributed to regulatory uncertainty, particularly around investment in critical minerals.
In June, Treasurer Jim Chalmers ordered investors with ties to China to divest their shares in Northern Minerals, a heavy rare earth project in the Kimberley, after the Foreign Investment Review Board (FIRB) said it was against Australia’s national interest.
Foreign investment was also a topic of discussion during Chalmers’ visit to Beijing last week, the first by an Australian treasurer since 2017.
Over the two-day visit, Chalmers said he conveyed to his counterparts that FIRB’s approval process was “non-discriminatory” and he “welcomed the chance [to provide clarity]”.
“Obviously Australia and China – we have our differences. But we have agreed to work together where we can when it comes to really important areas like trade and investment, decarbonisation of our industries and business engagement as well,” Chalmers said.
“We approve overwhelmingly the vast majority of proposals which come to us when it comes to foreign investment. Rejecting proposals is a very rare thing, and it isn’t just from one country.”
CEF said FIRB’s rules of engagement should be clarified and communicated to prospective investors.
“The time to act is now,” David Olsson, president of the Australia China Business Council, said.
“We have the resources and capability, but if we don’t create the right environment to attract these technologies and solutions, those investments will go elsewhere.”
“By aligning our strengths in clean tech and renewable energy, we can confront the challenges of climate change together and unlock immense opportunities for both our economies.”
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