Legal firm Hall & Wilcox says proposed changes to the Significant Investor Visa (SIV) raised in an Austrade discussion paper will prove unworkable as it misunderstands Chinese investors.
Eugene Chen, a Special Counsel and Head of China practice at Hall & Wilcox, said proposed new requirements, which include investing minimum 50 per cent in venture capital and small caps funds, along with a ban on direct investment in residential property (potentially extending to residential property development), introduce unacceptable risks for Chinese investors.
“We have worked closely with fund managers and financial services firms to attract Chinese investors since the scheme was introduced, so we know what makes them tick.
“We know that Chinese investors want low risk investments, something that they understand.
“The risk appetite is not there.”
Mr Chen said he agrees with the need to increase venture capital (VC) investment in Australia, but warned the changes are unlikely to create a VC ‘honey pot’. “My understanding of Chinese SIV investors is that they may decide to opt-out altogether. It has potential to at least diminish, and possibly kill-off the regime.”
Chinese investors tend to see Australia as a destination for low risk, relatively stable returns, rather than speculation, according to Mr Chen. “If we look at it from the Chinese investor’s point of view, the difference in VC returns between Australia and China is vast.
“In China there are more opportunities for much more lucrative VC returns. But the risk profile is the same. So why take that risk in Australia?
“We cannot assume that the lure of residency will be enough, as these investors have other options.”
Mr Chen said that Hall & Wilcox clients had expressed strong concern at the changes. “We agree that more VC investment is needed. We also agree that land-banking is wrong. But the changes need to be considered further as they may put the scheme at risk.”