When the
federal government blocked two Chinese firms from buying a 99-year lease of
Sydney's electricity network, it sparked a firestorm of criticism. And it's
still raging.
On the face of it, the
critics seem to have a pretty good case. Most colourful was the former Labor
foreign affairs minister, Bob Carr, a regular commentator on China now that he
fronts the Australia-China Relations Institute.
By preventing the two
Chinese companies from buying a controlling 50.4 per cent stake in Ausgrid,
said Carr, the Turnbull government had made "a policy sacrifice to the
witches' sabbath of xenophobia and economic nationalism stirred up in the
recent federal election".
It's a very unpleasant
thought that Australia would turn away a prospective $10 billion investment out
of sheer xenophobia. China's foreign affairs ministry picked up on the theme.
The decision was a
matter of "deep concern" said the foreign affairs ministry in
Beijing. Australia should "avoid discrimination and provide a fair
environment".
China's commerce
ministry added that there would be consequences. "This kind of
decision is protectionist and seriously impacts the willingness of Chinese
companies to invest in Australia," ministry spokesman Shen Danyang said.
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Implication: Chinese investors will take their money elsewhere and
Australia will suffer.
Among foreign investors
in Australia, the US has the biggest accumulated stock of investment at $860
billion last year or 28 per cent of the total at the end of 2014-15,
followed by Britain, Belgium, Japan and Singapore.
But for new investments,
China is the biggest source, with approved investments in Australia last year
of $46 billion, accounting for a quarter of the total for the year, according
to the Foreign Investment Review Board.
And China is Australia's
biggest trading partner, so a potential backlash must be a worrisome prospect.
In announcing his veto,
the Treasurer, Scott Morrison, said: "In making this decision, national
interest concerns have been paramount. They relate to the transaction structure
as currently proposed and the nature of the assets." He would go no
further in explaining.
But in attacking the
decision, Carr pointed out that one of the two bidders, China's
government-owned State Grid, already had investments in two other electricity
providers in Australia. There were "serious inconsistencies" that
needed to be addressed, he said.
On this point, Morrison
has only said that Ausgrid is not the same as the other electricity firms.
And Morrison has form.
His decision to twice block a Chinese buyer from acquiring the vast S. Kidman
& Co pastoral property, Australia's biggest by land area, was based purely
on public concern over foreign ownership.
So what's going on here?
To make sense of this,
let's go beyond the politicians. The clearest explanation of the Ausgrid
decision has come from a rare public intervention by the chair of the Foreign
Investment Review Board, businessman Brian Wilson.
Wilson told The
Australian Financial Review's Aaron Patrick that the board was unanimous in
recommending against the bidders: "The proposed structure is contrary to
the national security interest because it leaves a material national security
vulnerability," Wilson said.
"Almost by
definition, it is not a security issue you can disclose."
Wilson added: "This
particular decision was in no way politically influenced. It came down to a
genuine national security issue that became apparent as the detailed work was
done on the asset sale.
"Sometimes at the
end of the day, a government might make a decision to keep the general public
happy." Kidman, for instance. "This is not one of those cases,"
Wilson concluded.
The exact nature of the
"national security vulnerability" is classified. But, again reaching
beyond the politicians, the following agencies were unanimous in recommending
to the government that the sale be blocked: the Australian Security
Intelligence Organisation, the Australian Signals Directorate, Australia's
electronic spy agency, and the Department of Defence.
These agencies gave the
go-ahead for a Chinese firm, Landbridge, to buy a controlling interest in the
Port of Darwin; we can conclude they are not acting out of xenophobia.
In this circumstance,
the question is not: "How could the Treasurer block the
bidders?" The question is, with the security and intelligence
agencies united in advising against it, how could any Treasurer approve it? He
would be eviscerated, and rightly, for betraying the nation's security.
As for Carr, he should
understand the paramount importance of national security.
When the federal
government barred China's Huawei from bidding to build the National Broadband
Network in 2012, Carr, as foreign minister, said that Australia was entitled to
defend its national security.
"I don't think any
other country in the world would have made a different decision in the
circumstances," he told ABC's 7.30. "And I'd like to think on
the bottom line, after due consideration, the Chinese would accept this."
Which, of course, they
did. Since then, Australia has signed a free trade agreement with China.
China's investment into Australia has boomed. Two-way trade has thrived. The
two countries have agreed to annual leaders' meetings. And they've conducted
their first joint military exercises.
Chinese bluster is part
of the theatre. Doesn't Carr understand this? He certainly should. In 2012 he was
paid to represent Australia. Today, his partly Chinese-funded institute pays
him to be part of the Chinese bluster.
If the Chinese truly
believed the Ausgrid decision was discriminatory, they would have asked to see
the Department of Foreign Affairs and Trade about their concerns. Or to see
Foreign Affairs Minister Julie Bishop. Or Treasurer Scott Morrison. Or Prime
Minister Malcolm Turnbull.
In fact, China has
approached none of them about the Ausgrid decision. Bob Carr may want
Australia to live on its knees to foreign interests; the Chinese government is
more realistic. Illustration: John Shakespeare
Peter Hartcher is international editor.
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