Ausgrid, one of Australia’s largest electricity suppliers, was preparing to sell itself off to Chinese interests, but officials in Canberra blocked the sale at the last minute. Reuters reports:
Treasurer Scott Morrison, from the country’s pro-business centre-right coalition, halted the A$10 billion ($7.7 billion) sale of Ausgrid to government-owned State Grid Corp of China and Hong Kong’s Cheung Kong Infrastructure Holdings on Thursday, citing national security issues.
“The South China Sea disputes, the increased recognition that the Chinese regime is more authoritarian than we originally thought and the fact we are dealing with a state-owned enterprise; those three things have suspended people’s free-market instincts,” a senior member of Australia’s ruling Coalition told Reuters.
The intervention surprised analysts. Australia’s governing coalition has often been accused of being too close to Beijing—of prioritizing business over national security.
Blocking the sale is not a risk-free move. Australia exports a lot of raw materials to China and has other economic interests as well. China Daily and Xinhua have both criticized Canberra’s move, with the latter calling it “inconstant” and suggesting it might dissuade Chinese investors from entering Australia. That raises concerns Australian politicians can’t easily dismiss.
But they needn’t be too worried about losing luster in China’s eye, either. Many Chinese investors are looking outside China for opportunities as conditions on the mainland become less hospitable. M&A has skyrocketed this year, with many deals involving the purchase of non-Chinese firms. Even if Australia becomes more careful about what M&A activity it allows, Chinese investors seem unlikely to ignore smart investment opportunities there.
Playing the investments card isn’t new for China: just the other day, Xinhua warned South Korea that it might see a deterioration in economic ties if it continues to behave in ways that China doesn’t like. But these deals go both ways: South Korea and Australia lose out if Chinese investors hold back, but so do those Chinese investors. Indeed, the more obvious big picture story here is that China’s aggression is limiting its economic opportunities. The question isn’t so much whether Australia and South Korea want to prioritize immediate geopolitical worries over economic relationships, but whether China wants to risk shrinking its own investment universe.