25 Mar 2013

Digging Deep: What are the key sectors for Chinese investment in the energy & resources sector?

Our report "Digging Deep: Chinese investment in Australian energy and resources" reveals the key sectors for Chinese investment, as Jonathan Li from our Energy & Resources group explains.

Digging Deep: What are the key sectors for Chinese investment in the energy & resources sector?
Jonathan Li, Partner, Clayton Utz

Well I think from our research we clearly identify the typical profile of a Chinese investor and its market entry strategy.

This investor is a state owned enterprise – in fact 74% of all investments by number and 97% by value are made by state owned enterprises. The state owned enterprises invested for the dominant purpose of security supply – 78% of them – rather than for financial gain or other purposes. They've invested in development projects 67% of the time rather than exploration or production projects or producing projects.

They generally acquired passive minority shareholding stakes in companies for less than $250 million and they relied on existing Australian management to manage the companies and projects that they invested in.

Our findings on the shift of the intensity of interest of Chinese investors in each of the key sectors over the eight-year period I think are particularly fascinating. Now having advised on many Chinese investors on these investors over a period of time I was well aware at least anecdotally that interest in iron ore has cooled off since 2008 and 2009 and there has been a rise in the number of investments and certainly interest in gold and the energy sectors. Now our research was able to actually quantify this shift of interest. Going into the end of 2012, it is clear that there were three sectors that were experiencing intense interest: gold, oil and gas and uranium. In the case of the gold sector, the value of investments made in just the two years going into the end of 2012 constituted 97% of all investments made in the gold sector in the entire eight-year period.

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