In October 2015, proud of having secured £30 billion ($39 billion; €35 billion) of Chinese investment into the British economy, then-UK Chancellor George Osborne lauded the start of a “golden era” for business ties between Beijing and London. Less than a year later, gold remains the defining colour of their relations, but the partnership has since turned into rivalry, with the UK nudging slightly ahead in the medal table of the 2016 Rio Olympics.
The irony doesn’t stop there. Two weeks ago the new, post-referendum UK government announced that it would pause Osborne’s cherished £18 billion Hinkley Point C project, a nuclear plant in which state-backed China General Nuclear Power Corporation was to be a junior investor.
The U-turn has made China irate – all the more so as it suffered another snub shortly thereafter, this time from Down Under. Last week, Australian Treasurer Scott Morrison preliminarily blocked bids from China’s State Grid and Hong Kong's Cheung Kong Infrastructure, the only two suitors in the running to buy 50.4 percent of Ausgrid, Sydney’s electricity distribution network. The rationale was clear: “My preliminary view is that the foreign investment proposals put to me for this transaction are contrary to the national interest,” Morrison said in a press release.
That Western countries feel uneasy about China’s appetite for treasured assets deserves some sympathy. Chinese hackers, after all, are said to account for a significant share of the hundreds of attempts to attack critical infrastructure every year. The world’s most populous nation has also become a more assertive power of late, elbowing out neighbours in the South China Sea and ignoring a related international ruling.
But Western leaders should also be careful not to justify policy reversals on loosely defined national security imperatives, especially when the latter seem designed to exclude China from the race. And in this respect, the Ausgrid decision appears especially clumsy.
Given that the sale kicked off nine months ago, one can only wonder why the Treasury let the process drag on for so long before killing it at the last minute. Judging by the existential nature of the concerns involved, presumably these already existed when the asset was put to market? The timing of the decision, coming just weeks after a tightly contested election that gave much power to independent and minority-party Senators, was also noted by observers.
It doesn’t help that beyond referring to Ausgrid's “provision of critical power and communications services to business and government”, the Treasury’s concerns haven’t been articulated – a secret worth preserving, perhaps, on the grounds that disclosing the exact nature of the threat would, well, represent a threat to national security. Morrison has given the two bidders an 18 August deadline to address said concerns. One can only hope they, at least, clearly know what those concerns are.
That is especially pertinent given the investment history of the bidders involved. State Grid, the world’s largest utility, already holds stakes in energy infrastructure in the Australian Capital Territory, Queensland, South Australia and Victoria. CKI, for its part, last week said that it owns more infrastructure in Australia than in Hong Kong and China. In the words of Michael Pascoe, a columnist at the Sydney Morning Herald, “if they really are a national security threat, then we're already screwed”.
Also, while State Grid is state-backed, CKI is a private company owned by Li Ka Shing, Hong Kong’s richest man, as well as the likes of Vanguard, BlackRock and Norway’s sovereign wealth fund. All of which highlights what’s really missing from Australia’s foreign takeover policy: clear and tangible rules.
Ironically, the standoff came just days before Canberra and Beijing unveiled a so-called ‘Partnership for Change’, a new treaty that would make it easier for Beijing-backed companies to invest Down Under. Australia could win big in return, including greater access to China's fast-growing services sector. But Australia’s tendency to move the goal posts has not gone unnoticed. Unless it assesses Chinese bids on their own merits, the prize might soon run out of Canberra’s reach.
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