Australian authorities have rejected a Chinese state-owned enterprise’s acquisition of a local property builder on national security grounds as Australia-China relations are in full reverse. Some scholars believe that the relationship between Chinese SOEs and the military has increased the risk of M&A deals, and that more Chinese investments will be rejected by Australia in the future.
China Construction Group, which was blocked by Australian authorities on national security grounds, had planned to use A$300 million to acquire an 88 percent stake in Australian property builder Probuild, but Probuild’s South African parent company later confirmed that China Construction Group had withdrawn its acquisition plan.
Australia implemented a new version of the Foreign Investment Act this month, giving the government greater powers to assess and review foreign investment proposals in sensitive areas, and even to order the withdrawal of such projects. The setback to the China Construction Group’s acquisition plan is seen as an important part of the authorities’ crackdown on mergers and acquisitions by Chinese state-owned enterprises.
Feng Chongyi, an academic at the University of Technology Sydney, told the station that the Australian federal government has a special committee to review foreign investment projects, and it is expected that the China Construction Group will not pass this committee. He said the Liberal National Party ruling coalition and the Labor Party have long agreed that construction involving infrastructure will involve national security and cannot be in the hands of foreigners.
Feng Chongyi said: (Chinese) state-owned enterprises to buy, the company in the future, if the defense or infrastructure projects, you have no reason not to give it a bid, it (the Australian government) for Chinese state-owned enterprises to buy any of Australia’s projects, in the law it has reasons to refuse. It defines (Chinese) state-owned enterprises as an extension of state power.
Some Australian analysts believe that the United States earlier included “China Construction Group” in the list of companies related to the Chinese People’s Liberation Army, which does not exclude Australia to follow the United States and reject the acquisition.
This in itself is an ambiguous area, said Feng Chongyi. It also allows Australia to define it as a defense company when it makes its judgment. According to their political conception is that there is a perceived risk, and the decision in question is about risk avoidance.
This is not the first time that a Chinese investor’s merger or acquisition has triggered a public backlash; in 2015, a Chinese-owned company, Arashi Bridge Group, entered into a leasehold agreement with the Australian government in the Northern Territory. “Arashiqiao paid a one-time rent of more than A$500 million for the right to operate the port of Darwin for 99 years.
“Arashi Bridge claimed at the time that the deal would help boost trade and tourism between Australia and China, but local opposition grew louder as relations between Australia and China deteriorated.
Australia and the United States are both members of the Five Eyes Alliance, and a lot of information and intelligence is shared, said Feng Chongyi, adding that Darwin is a dual-use port. U.S. ships and naval forces will visit Australia to moor their ships in this port, and the two sides will hold joint military exercises with Darwin Port as an important base. Therefore, Darwin port military information security risk is very high, resulting in a very difficult relationship with the United States of America issues.
In recent years, the Northern Territory has experienced a serious economic downturn and the government is experiencing financial difficulties. Australian commentator Huang Fujing believes it is no coincidence that Chinese companies are interested in the Port of Darwin.
Huang Fujing said: “While the Northern Territory government is temporarily benefiting from some increased revenue, the long-term damage to Australia’s national security interests cannot be underestimated. Australia has made it clear that the Chinese Communist Party is “not interested in wine”. It wants to use Australia as a supplier of resources and energy, with the aim of stealing strategically important Australian defence information.
In Beijing, the Chinese Foreign Ministry criticized Australia’s political interference on national security grounds and urged Australia to adhere to the principles of open markets and fair competition and to provide a fair, open and non-discriminatory business environment for enterprises of all countries.
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