Chinese investment in Australia has reached the highest level since the global financial crisis (GFC), up 12 per cent from 2015 to $15.4 billion last year.

A new report from Sydney University and accounting firm KPMG found a record 103 deals were signed between Chinese and Australian companies in 2016.

But the annual report, Demystifying Chinese Investment in Australia, warned that Australia risked missing out on the Chinese investment boom in the future because Chinese investors were looking more towards the United States and Europe.

Co-author Professor Hans Hendrischke, from the University of Sydney Business School, said investment from China had slowed down.

"Australia has proven itself to be a preferred destination for Chinese capital, but we must be cognisant that the growth in investment is slowing compared to other parts of the world such as the United States and the EU," he said.

Australia is the second biggest recipient of Chinese investment globally behind the US, with $US90 billion in investment since 2007.

Professor Hendrischke said commercial real estate, infrastructure projects and health care attracted the most investment.

"Australia is providing major goods for Chinese consumers that is agricultural goods, that is services, so Australia is part of a new orientation of the Chinese economy," he told the ABC's RN Breakfast program.

Focus shifts to low-rise housing

The report found more than one third of Chinese direct investment in 2016 in Australia was in commercial real estate, although the numbers fell slightly from 2015.

Investors are looking to medium density and greenfield developments. ( ABC RN: David Lewis )

Investors shifted their focus from major office investments to residential construction, looking beyond inner-city, high-rise apartments to medium density and greenfield developments.

Residential development sites accounted for just over half of China's real estate investments in Australia.

Chinese investors also bought $1.7 billion in hotel assets over the past two years and are expected to buy more in 2017.

Investment in infrastructure rose to 28 per cent to a record $4.34 billion, with China's sovereign wealth fund taking stakes in transport firm Asciano, and the Port of Melbourne.

There was also continued investment in healthcare at 9 per cent of China foreign investment flows into Australia. China Resources Holdings invested $383 million in radiation, oncology, and cardiology services provider Genesis Care.

Losses in mining, renewed interest in energy and agriculture

The slump in the mining industry was reflected in Chinese investment flows, which slipped by more than one third from 9 per cent in 2015 to 5 per cent last year with deals worth $839 million including in the gold industry.

Chinese investment rose in both the energy and agriculture industries.

There was a record 12 deals in agribusiness with a record $1.2 billion invested by Chinese companies in 2016 up threefold from 2015.

Rising demand for quality food in China drove the investments in the dairy, meat, seafood and wine industries.

Professor Hendrischke said China was attempting to secure resource supply and build supply chains.

"From the Chinese perspective, we are on the luxury end of the market," he said.

"We provide the top quality beef, we provide the top quality dairy products, so we are not part of the mass market."

Investment increase shared across several states

Just half of all investment in 2016 went to New South Wales, then Victoria and South Australia, which saw investment more than double from 2015 to 2016.

Investment in Western Australia jumped from $114 million in 2015 to $1.4 billion last year.

Tasmania saw $280 million worth of agribusiness deals.

Most deals involved private Chinese investors rather than state owned companies as China shifts from an export driven economy to a consumer driven economy.

China singles out 'irrational' investments

China's economic plan singled out real estate, entertainment and hotels among "irrational" overseas investments. ( Supplied: ASF )

The report said China was increasing its oversight of overseas investment to reduce excessive capital outflows and lower financial risks.

Real estate, hotels, film, entertainment and sports clubs were among the industries that had been singled out as "irrational" overseas investment by Chinese authorities during the country's current economic plan, the 13th Five-Year Plan.

"In our view, strengthening regulatory oversight of Chinese overseas investments should lead to better, more value-accretive transactions for China and host countries," said Vaughn Barber, head of KPMG's China practice.

"We believe China's ODI (overseas direct investment) will continue to exhibit robust growth over the long term, and especially in the sectors and markets whose development is necessary to achieve the goals laid out in the 13th Five-Year Plan."

The report also said that Chinese investors wanted more clarity if foreign investment regulations are further tightened in Australia's upcoming Foreign Policy White Paper.

Last year, the Federal Government blocked a Chinese and Hong Kong consortium from buying a 99-year lease for NSW power firm Ausgrid on national security grounds.