Oceania’s billionaire club grows by nine

14 November 2018 Consultancy.com.au

The world’s rich-list got even richer this year and Oceania with its relatively low population density took its fair share of the pie. Of the 332 new billionaires this year, 9 were from Australia or New Zealand.

Around the world, billionaires’ wealth enjoyed its greatest-ever increase in 2017, rising 19 percent to USD 8.9 trillion shared among 2,158 individuals, according to the ‘Billionaires Insights 2018’ study from UBS Global Wealth Management (UBS) and global professional services firm PwC.

The biggest wealth accumulation took place in China despite healthy growth in the Americas and Europe. Greater China experienced the largest surge in billionaires with China adding 57 newcomers to the list which was closely followed by South East Asia, were a total of 37 joined the club.

North America is still the greatest hub of ultra hight net worth individuals – with a total number of billionaires sitting at 631 – having added 32 this year. Whilst this may be higher than the 475 strong ultra-rich in China, it does represent a significant shift. Over the past few years the Chinese have dominated both North America and Europe in terms of wealth creation.

Combined, Asia Pacific or APAC is home to more of the world’s rich-list than either the Americas (North, Central & South America as well as the Caribbean) or EMEA (Europe, Middle East and Africa).

Number of billionaires in the world

“Asia's billionaires are young and relentless,” said Ravi Raju, the Head of Asia Pacific Ultra High Net Worth at UBS Global Wealth Management. “They are constantly transforming their companies, developing new business models and shifting rapidly into new sectors.

Raju also touches on the fact that more and more new billionaires are self-made. “This cohort is overwhelmingly self-made and determined to capitalise on one of history’s greatest moments for new enterprise.”

Of the 332 new billionaires over the past year, 199 are entrepreneurs. This presents a picture of a new generation of wealth creation largely due to tech entrepreneurship. A trend that is influencing far beyond Silicone Valley.

Amongst the usual suspects on the list – including Gina Rinehart, Harry Triguboff and Anthony Pratt – is newcomer Mike Cannon-Brookes. Cannon-Brookes is one of Australia’s richest individuals with an estimated $5 billion due to the successful initial public offering of his tech company Atlassian Inc. Just two years after Atlassian’s IPO, the company has now topped $10 billion.

Total wealth of billionaires by region

“We are experiencing a new wave of entrepreneurship worldwide, with billionaires at the vanguard of innovation. They are creating jobs and prosperity, but their impact goes beyond economics,” said Josef Stadler, Head of Ultra High Net Worth at UBS Global Wealth Management.

“A new generation is emerging, and they see an opportunity to tackle some of the greatest environmental and societal challenges facing humankind,” he continued. A local example of this is Cannon-Brookes recent investment into solar energy in Victoria and Queensland. The tech entrepreneur also announced earlier this week his plans to lobby the Australian government on energy policy with his new movement “Fair Dinkum Power”.

The Chinese century

Far overshadowing Oceania’s recent gains however is China. “Over the last decade, Chinese billionaires have created some of the world’s largest and most successful companies, raising living standards,” said Ravi Raju.

It might sound almost impossible but back in 1997, China did not have one billionaire. Today they have 373 having brought an inexplicable amount of wealth to the country. What may be even more surprising is that an overwhelming majority of 97% are self made billionaires. 

“Our report reveals how China is currently the leading country for entrepreneurs to create wealth. Nowhere else has the same combination of a huge population, technology innovation and government support,” said Dr. Marcel Widrig, Partner and Private Wealth Leader at PwC.

“We have also found that Next Gen billionaires are extremely entrepreneurial. Using the advantages of a top-tier university education and a global network, they often create their own new businesses combining latest technology with sustainability goals.”

“Further, billionaires are embracing sustainable investing, seeing how it not only does good, but also adds value in their businesses. Indeed, many of the younger generation want to change the world, making an impact through their family offices and philanthropic organisations.”

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Chinese investment into Australia plunges to eight-year low

09 April 2019 Consultancy.com.au

Chinese investment into Australia plunged to US$6.2 billion last year according to the latest KPMG analysis, down by more than 35 percent to an eight-year low. 

A study from global professional services firm KPMG in conjunction with The University of Sydney has found that Chinese investment into Australia dropped by 36.3 percent in 2018, despite Chinese outbound direct investment growing by 4.2 percent globally to nearly US$130 billion. Taking in mergers and acquisitions, joint ventures, and green-field projects, Chinese investment into Australia totaled US$6.2 billion in 2018, down from US$10 billion the previous year.

As part of an ongoing collaboration between the Big Four firm and Sydney Uni, the latest release in the ‘Demystifying Chinese Investment in Australia’ report series (now into its fifteenth edition) points to Chinese domestic policy changes for the decline, with the local downward rate of investment now coming into line with trends seen in the US and Canada, which last year recorded respective Chinese inbound investment drops of 83 percent and 47 percent (in USD terms).Value of Chinese ODI into US, Europe and Australia 2012-2018

Designed to reduce its international exposure, the policy measures being implemented in China since early 2017 require overseas investments by Chinese firms to be non-speculative, only undertaken after fully considering major potential risks, and consistent with the company’s strategy and the country’s socio‑economic development goals – with certain categories of investment encouraged and others prohibited or restricted.

With 80 percent of Chinese executives stating that it was more difficult to get capital out of China in 2018 compared with 65 percent the year prior, the result is the second-lowest Chinese inbound investment in Australia since the mining & gas driven investment peak of 2008, with over US$16 billion coming into the country. Outside of the US$3.9 billion figure in 2010, the investment sum hasn’t dipped below US$8 billion in a decade.Chinese investment into Australia - 2007 to 2018

Yet, despite the domestic policy measures and downturn in inbound investment, Australia is still seen as a relatively safe investment destination according to a cross-sector survey of Chinese executives, with an improving political climate (those cautious due to the local political debate dropped from 70 percent in 2017 to 59 percent last year) and slight increase in the sense of being welcomed – up three points to 38 percent, although those feeling ‘unwelcome’ also rose by four points to 19 percent.

“Whilst Chinese investors confirm they remain positive about many aspects of the Australian market and its prospects compared with many other countries, there is an increasing concern around transparency of regulations, high costs and their continued perception of being unwelcome as reflected by negative Australian media coverage.” the report states.  “We need to be aware of the very real impact that poorly received, politically motivated public discourse and unbalanced media coverage can have on the future level of Chinese capital entering Australia.”2018 Chinese investment into Australia by sector

As an investment breakdown, private Chinese companies accounted for 87 percent of the deal value in 2018 and over 92 percent of deal volume, with state-owned entities contributing only 13 percent of value and 8 percent of the volume – which in total, dropped by 28 percent from 102 transactions in 2017 to 74 last year. As per those deals, over 40 percent of the investment total was made in the Australian healthcare sector, a more than 110 percent increase on the prior year.

According to the analysts, Chinese investors are primarily interested in scalable medical services and healthcare products which can be scaled in their home market, and the Australian healthcare sector has gained increased interest due in part to the ‘Australia package’ – ‘the combination of transferable management know‑how, high‑level care service experience, state of the art technology, the ‘clean, green and healthy’ image of Australian products.”

Meanwhile, new mining investment has dropped sharply – down 90 percent from a spike last year for just 5.6 percent of the total – opening the door for commercial real estate (predominantly mixed-use development and office stock according to figures provided by Knight Frank) to claim the second highest levels of Chinese investment at ~37 percent (albeit down 31 percent on 2017 levels). The remaining deal value was mostly in oil & gas (8.8 percent, up 295 percent) and renewable energy (4.8 percent, up 217 percent) sectors.2018 Chinese investment into Australia by geography

Perhaps of further note, at least in terms of demystifying Chinese-Australian investment, ‘Northern Australia’ attracted at most just 8 percent of total investment, with Queensland accounting for only 5 percent, Western Australia 3 percent, and zero deals made in the Northern Territory. Here, the bulk of the inbound investment was made in New South Wales (56 percent) and Victoria (27 percent) with South Australia (8 percent) claiming the majority of the remainder.

“While this annual result brings Chinese ODI in Australia back to the second lowest level since 2008, there is no reason why Australia can’t return to higher levels seen historically,” the report concludes. “2018 need not define a trend, but it is a period to reflect upon. There are a great many opportunities for Chinese companies to contribute towards the development and internationalisation of Australian industries and supply chains in the coming years and there is much that can be done to improve the perception of the Australian market to Chinese investors and vice versa.”