Chinese investment in Australia remains at record lows despite the wish for expansion from business circles amid a thawing diplomatic relationship.

Although Chinese companies invested $1.42 billion in Australia last year — almost triple the investment in 2021, the figure marks the second-lowest level of such investment since 2007, when accountancy firm KPMG and the University of Sydney began compiling their "Demystifying Chinese Investment in Australia" annual report.

It is well below the 2008 figure, when Chinese companies spent $16.2 billion.

Relations between the two countries soured in recent years, particularly under former prime minister Scott Morrison's Liberal-National coalition government.

With the election of a Labor government in Canberra, relations have started to thaw, albeit slowly, with talk that trade restrictions will be lifted. Already there is talk that exports of Australian barley will resume shortly.

Last month saw the premiers of Australian states Victoria and Western Australia, Daniel Andrews and Mark McGowan, making official visits to China along with business leaders from their states.

A delegation of executives from Australian companies, including Rio Tinto, HSBC Australia, Telstra, Cochlear and Fortescue, visited China from April 23 to 29.

Organized by the Australia China Business Council, it was the first Australian industry delegation to China in three years.

"We made the point in our global context section that Chinese global ODI (overseas direct investment) is only recovering slowly, irrespective of some very large deals signed with some countries," said Hans Hendrischke, one of the co-authors of the latest edition of the report.

The 2022 result shows that Chinese investors lack enough confidence in the Australian market, Hendrischke said, and investment, as low as it is, can only occur in areas that can be considered safe and non-controversial.

"In addition, investment conditions for Chinese investors are being negotiated as part of the normalization or 'stabilization' of the bilateral relations and have been on the agenda of the meetings between our prime minister and the Chinese president," he added.

Zhu Ying, director of the Australia Centre for Asian Business at the University of South Australia, said though this report shows a slight pickup in investment last year, it will take some time for investment to return to the levels seen a few years ago.

A lot of work still needs to be done to put the relationship back on track, Zhu said. "But we are starting to see some progress."