The Chinese embassy has warned that the rejection this year of two bids by Chinese companies to invest in Australia showed “clear protectionist tendencies” which would have a “serious impact on the enthusiasm” of firms wanting to invest in Australia.
“The Chinese government is highly concerned about the statement by the Australian Treasurer on his preliminary decision to block the sale of the 50.4 per cent of Ausgrid in a 99-year lease to foreign bidders on national security grounds,” the embassy said yesterday in reply to questions from The Australian. It noted that last week’s move by Scott Morrison was the second time the government had rejected bids for Australian assets by Chinese interests, referring to the bid for the giant Kidman cattle property assets which was knocked back before the election, despite the bid being revised following an earlier response from the Treasurer.
The embassy said the handling of the two deals “shows a clear protectionist tendency” which “would have serious impact on the enthusiasm of Chinese firms which want to come and invest in Australia”.
“The Australian side stated on many occasions that it welcomes Chinese business investment, but made decisions just to the contrary.
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“The Chinese side hopes that the Australian government will make efforts to create a fairer, better and more transparent trade and investment environment for Chinese enterprises.”
The embassy said the Chinese company State Grid had “been involved in this commercial project for a long time and has been invited to table a binding offer”.
Representatives for bidders led by the State Grid electricity company and Hong Kong infrastructure company Cheung Kong Infrastructure, which were involved in the two final bids for a 99-year lease on NSW electricity company Ausgrid, are now assessing their situation following last week’s surprise “preliminary” rejection of their bids on the grounds of national security.
Both the NSW government and the two bidders are believed to be keen to keep the bid alive to avoid starting a long and costly new process.
But sources said the bidders had been hampered by the lack of clarity about what national security issues they had to address and the acceptable level of foreign ownership for any revised bid. Market sources said there was likely to be a number of Australian investors and businesses interested in partnering with either of the Chinese companies on a revised bid but that they also needed clarity about what level of foreign ownership would be acceptable
It is believed both State Grid and CKI want operating control of Ausgrid to improve the way it is run and returns.
But expectations are that the federal Government will make a final decision against the bids within the next week, having provided the two bidders with “natural justice” to make a response by Friday.
The rejection came after the Foreign Investment Review Board gave the green light to the short list of bidders in December, with State Grid and CKI the only companies to lodge formal bids.
The Chinese embassy’s comments, in response to questions from The Australian, show the new confusion and concern at a high level on Australia’s view of future Chinese investment, particularly in light of other signals such as the signing of the free trade agreement between Australia and China in 2015. “China and Australia are important trading partners to each other,” the embassy noted.
“Our bilateral relations were upgraded to a comprehensive strategic partnership in 2014, as demonstrated by the signing and entry into force of the China-Australia free-trade agreement in 2015,” it said.
FIRB chairman Brian Wilson on Monday said the decision to reject the two Chinese bidders was “not anti-China”.
He said the recommendation to reject the bids on national security grounds was a unanimous decision of the board following new information from national security agencies and that FIRB had not changed its mind.
But Mr Wilson and Mr Morrison said they could not disclose the detail of the information because it was on national security grounds.
The preliminary rejection came despite the widespread view that Ausgrid is a less sensitive asset than Transgrid, which was sold by the NSW government last year for $10.3 billion, with State Grid greenlighted as a finalist.
The NSW government is selling 50.4 per cent of Ausgrid, while Transgrid involved a 99-year lease on 100 per cent of a company which runs the state’s transmission lines.
It is not the first time the government has invoked national security concerns about Chinese bidders with the proximity of assets to the Woomera defence facility triggering rejections by FIRB for both the China Penxin bid for S Kidman & Co pastoral company and China Minmetals 2009 bid for OZ Minerals. China Minmetals was later allowed to buy all of the OZ Minerals’ assets except the Prominent Hill Copper and gold mine.
FIRB, however, allowed State Grid to purchase a minority interest in ElectraNet in 2013, giving it an operating stake in the South Australian electricity transmission business.
South Australia’s distribution network has been majority-owned by CKI since 1998 when it was sold by the Olsen Government.