The freshly inked China-Australia Free Trade Agreement (ChAFTA) has been hailed as major boon for domestic industry by the Property Council of Australia, and promises to provide a cornucopia of opportunities in Asia’s biggest economy to local businesses.
While mainstream media attention has focused primarily on the significant of ChAFTA for Australia agriculture and resources, it will also have extensive benefits in three core areas for property investors on both sides.
ChAFTA will open the floodgates to increased Chinese investment in Australia, chiefly by raising the threshold for scrutiny by the Foreign Investment Review Board (FIRB) of acquisitions by private Chinese companies in non-sensitive areas.
Whereas previously the attention of FIRB was required for investments breaching the $248 million level, this threshold has been more than quadrupled by ChaAFTA to $1.078 billion.
A second core benefit is the unprecedented access to the Chinese market that ChaFTA grants to Australian businesses – a major coup for property service providers in particular given the size of the Middle Kingdom’s real estate sector, its ongoing demand for expertise from abroad, and the investment appetites of the country’s burgeoning class of nouveau riche.
Under ChaAFTA, companies from Australia are now exempt from business scope restrictions, conferring far greater latitude to their business activities in China far greater latitude.
Subsidiaries providing property-related services in China can now be wholly owned by Australian companies, obviating the need for often unwieldy and complicated joint-venture arrangements.
The third core benefit provided by ChaFTA is the greater labour mobility between China and Australia created by a loosening of migration restrictions, making it far easier for large-scale infrastructure and development projects to get off the ground.
Investment Facilitation Arrangements (IFAs) will be provided for large-scale infrastructure projects worth in excess of $150 million. IFAs will, as their name would imply, facilitate labour arrangements for these large-scale projects, while still operating within the ambit of Australia’s existing visa framework.