CHINA'S mergers and acquisitions in Australia soared by 34 per cent last year to $8.5 billion -- the highest level since 2009 -- despite Chinese foreign deals declining overall.

North American deals from China fell by 59 per cent, and European deals by 46 per cent, according to a report released today by PricewaterhouseCoopers. In total, the value of Chinese mergers and acquisitions fell 20 per cent last year, from $73.5bn to $57bn.

But activity grew rapidly in Africa, the Middle East and elsewhere in Asia.

Australia, said Andrew Parker, the head of PwC's Asian deals desk, increased its share of total outbound investment to 15 per cent, compared with 12 per cent in 2011 and 9 per cent in 2012.

Only the US and Canada receive more investment from China. Energy and power assets comprised 74 per cent of China's 2013 investments in Australia, with mining assets falling to 20 per cent, from 51 per cent in 2012.

Mr Parker said: "It is entirely possible that China's investment allocation may now be considered to be overweight in Australia," and that its relative share would fall -- given Australia's ranking as the world's 12th biggest economy.

He said it was "of critical concern that most Australians still believe the Australian government is allowing too much investment from China. "Yet our ability to attract foreign capital underpins the prosperity of all Australians," he said.

Mr Parker said Australia should make its priority concluding a free trade agreement with China that includeed lifting the foreign investment review threshold: "When you consider that China's investment in offshore markets may top $550bn in the next five years, the opportunity cost of not seeking greater engagement with China is clear."

Mr Parker expected Chinese overseas investments to rebound this year, helped by the National Development and Reform Commission's move to free up its regulations that required approval for deals worth less than $1.1bn.

"It's an open question," he said, "whether Australia will continue to grow its share of the pie."

While the first half of 2013 was quiet in M&A terms, the volume increased in the second half -- indicating, the report said, that "momentum is returning to deal growth".