Answer to Question #79659 in Finance for Justin Jian Hui Lam

Question

FDI Restrictions in Selected Industries Some countries restrict foreign ownership in selected industries such as banking, media and telecommunications.
a. If Australia introduced fresh restrictions on foreign ownership in the real estate sector how would this affect Australian real estate companies? Australian home owners? Renters?
b. If Australia removed previously existing restrictions on foreign ownership in the banking sector, how would this event affect Australian-owned banks? Bank customers? Shareholders of Australian banks?

Answer 1

a) Over the past 3 years, China has become the most influential real estate investor in the Australian market. China invested a huge amount of money in this sector and became the main stimulator of development. Suppose that the Australian government has introduced new restrictions. Then the real estate sector will lose a huge influx of foreign capital and the sector will stop growing. It would be bad new because of a radical changes on the market, which certainly entails a fall in quotations. Rental prices will increase due to the fact that the development of the sector will stop.

b) China is also interested in increasing its influence on the Australian banking industry. With the removal of restrictions, Australia will receive a huge influx of Chinese banks, which will constitute a strong competition to Australian banks. For bank customers it would be good, because high competition will stimulate better offers for them.
Shareholders of Australian banks will lose significant funds due to the fact that Chinese competitors can seriously hit their positions. It could be possible because they have massive resources of capital and are ready to aggressive expansion.