Chinese Banks Booming in Australia

As a bevy of Chinese mining companies have forayed into Australia, the local-incorporated Chinese banks are going through their best times in the country.

From November 2007 to September 2010, the Foreign Investment Review Board (FIRB) of Australia had given green light to over 190 Chinese investments, involving as much as AUD 60 billion, versus AUD 4.05 billion a decade ago.

Latest statistics show that from the period of 2005 to 2009, the Sidney branch of Bank of China Limited (BOC, SEHK: 3988 and SHSE: 601988) saw its profits rise 314%, much higher than the average of 42% seen by local banks.

Chinese investment in Australian farms increased 10-fold in the past six months, as Australia relaxed rules governing residential property purchasing and buyers see opportunities in agriculture.

Australia's agriculture industry represents about 12 percent of the AUD1.21 trillion economy and the country has some of the largest farms in the world. Anna Creek, a South Australia state cattle ranch measuring 23,677 square kilometers (9,142 square miles) or almost the size of Belgium, is its biggest.

China is Australia's largest trading partner, buying AUD83 billion worth of goods and services from the world's biggest exporter of coal and iron ore in the year ended June 30, 2009. Chinese investment in Australian resources has soared as demand rises in the world's fastest growing major economy.

The Australian Competition and Consumer Commission lately cleared Royal Dutch Shell Plc and PetroChina Company Limited (SHSE: 601857, SEHK: 0857 and NYSE: PTR)'s AUD3.5 billion bid to acquire Arrow Energy Ltd. The purchase, the latest Chinese investment in Australian minerals and energy, needs FIRB approval.

The FIRB in 2008 relaxed rules for foreign investment in residential properties. That has seen overseas investment rise and house prices soar, according to real estate agents. House prices nationally have gained 14.4 percent, with a 22.5 percent increase in Melbourne and 14 percent in Sydney, according to RP Data figures.

Increased investment could make some farm owners anxious, said Warren Truss, leader of the opposition rural-based National Party. Some communities are concerned buyers are interested in mineral deposits under the farms, such as coal, rather than their agricultural production.

Reserve Bank of Australia Governor Glenn Stevens said on March 26 the central bank was monitoring how the FIRB changes affected the housing market.

The jump in house prices was among reasons Stevens boosted the benchmark interest rate this month for the fifth time in six meetings to 4.25 percent. A surge in foreign buyers may also hurt the government's efforts to make dwellings more affordable.