From agriculture to clean energy, Australia-China investment and business ties offer vast potential for collaboration across both traditional and emerging sectors, says a leading Australian scholar.

The relationship between Australia and China is "quite particular", underpinned by long-standing cooperation in key industries, most notably Australian iron ore exports, as well as other specialized markets such as agriculture, education and tourism, said Hans Hendrischke, a professor at the University of Sydney Business School.

The main attractions in Australia presenting significant opportunities for Chinese investment can now be seen at different levels. Apart from the traditionally strong area of iron ore, there is fresh focus on new minerals such as lithium — essential for the green energy transition and battery supply chains, Hendrischke said.

As the head of the school's Australia-China Business Network and chair of the business and economics cluster at the university's China Studies Centre, Hendrischke has been at the forefront of research on bilateral trade and investment.

He also leads a strategic research project that publishes annual reports on Chinese outbound direct investment in Australia and provides insights into evolving business relations between the two countries.

"The bilateral relationship is very strong in terms of trade volume," he said. But regarding deeper economic interactions, such as mutual investment, the level of engagement is much weaker than one would expect given the scale of trade, he added.

China is Australia's largest two-way trading partner, accounting for 26 percent of its global goods and services trade in 2023-24, according to the Department of Foreign Affairs and Trade of the Australian government.

"China is the fifth-largest foreign direct investor in Australia, accounting for 4 percent of total foreign direct investment," the department said on its website. "In recent years, Chinese investment has broadened from mainly mining to other sectors including infrastructure and healthcare."

Australian foreign direct investment in China totaled $1.4 billion in 2023, it said.

Global factors

Hendrischke emphasized that Australia-China relations are "very much influenced by international events and the geostrategic, geopolitical situation", extending into economic cooperation and development.

Amid these challenges, agriculture remains a sector with much potential, he said.

"We know there is demand and interest in the Chinese market, but there is very little uptake of opportunities in the Australian market. We've observed that over the years now," he said.

"We are surprised that every year, when we do our statistics, in spite of all the interest that we've noticed there, the growth and the uptake is rather limited. That could be linked to the general geopolitical atmosphere, the confidence that people have in cooperation."

The energy sector is another field where Australia could attract greater investment through deeper cooperation, Hendrischke added.

Investment that once flowed to Australia is now being redirected to Southeast Asia, creating competitive pressure, he said. "These are areas where Australia could again work with China if we didn't have the broader geopolitical issues."

Europe, for example, attracts Chinese investment linked to technology and innovation based on a strong manufacturing sector, he said.

"But we don't really see it in Australia, there is very little investment coming in for manufacturing. There is potential, but it would require that political and geopolitical differences are somehow settled."

Business confidence

In terms of boosting business confidence amid global economic uncertainty, Hendrischke highlighted China's recently released Government Work Report.

In a highly unpredictable and complicated environment, China's announcement of policies aimed at increasing incentives for foreign investment sends a clear message that business remains on track, he said.

The country's GDP growth target of around 5 percent for the year reflects the sign of "giving confidence to both the domestic and international audience", Hendrischke said.

By setting this target, China signals its commitment to stability and reassures investors that it does not anticipate any disruptions — despite the global landscape being marked by uncertainty and unpredictability, he said.

"With the economic tools that were announced, again, the main thrust of the message is that China can continue with business as usual ... the point being that the government policy is meant to be stable," he said.

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