Australian Treasurer Josh Frydenberg yesterday declined to comment on whether he had intended to block a Chinese state-owned enterprise’s (SOE) takeover of an Australian-based construction firm.
China State Construction Engineering Corp (中國建築工程), one of the world’s biggest construction companies, had planned to buy South African-owned and Sydney-based Probuild for A$300 million (US$233.2 million).
However, Probuild’s owner, Wilson Bayly Holmes-Ovcon Ltd (WBHO), told the Johannesburg Stock Exchange this week that the Chinese suitor had withdrawn its offer because Frydenberg would have blocked the sale.
“WBHO has been advised by the potential acquirer of Probuild that it has withdrawn its proposed investment application in Probuild lodged with the Australian Foreign Investment Review Board following advice that its application would be rejected by the federal government on the grounds of national security,” the parent company’s statement said.
Frydenberg declined to comment on the potential sale.
“The government does not comment on the application of the foreign investment screening arrangements as they apply or could apply to particular cases,” Frydenberg said in a statement.
China and Australia are major trading partners, but their ties markedly worsened last year when Australia called for an independent inquiry into the origins of the COVID-19 pandemic.
One of China’s top grievances with Australia is Frydenberg’s decision in August last year to block the US$430 million sale of Japanese brewer Kirin Holdings Co’s Australian beverage unit to Chinese company China Mengniu Dairy Co (中國蒙牛乳業).
Chinese Ministry of Foreign Affairs spokesman Zhao Lijian (趙立堅) on Tuesday described Australian interference in the Probuild sale as the “latest example of how the Australian government has been politicizing trade and investment issues, violating market principles and the spirit of the China-Australia free trade agreement, and imposing discriminatory measures on Chinese companies.”
“It is a mistake to politicize normal commercial cooperation and seek political interference in the name of national security,” Zhao said.
Rebecca Mendelsohn, an Australian National University expert on foreign investment, said that the national interest question was broader than whether an asset should be in Australian or foreign hands.
“In this case, it seems the government thinks that the identity of the acquirer matters — ie, that there is no equivalence between a privately run South African firm and an SOE with alleged links to Chinese security agencies,” Mendelsohn said.
New Australian foreign investment laws came into effect on Jan. 1, which Canberra said in a statement ensured that the board “keeps pace with emerging risks and global developments.”
The board examines proposed foreign acquisitions, and advises Frydenberg on whether they are in Australia’s interests on economic and security grounds.
The changes include removing monetary thresholds that limited what acquisitions could be reviewed on national interest grounds.
Mendelsohn said that she did not think the new laws would necessarily lead to more investments being blocked.
“It does indicate the seriousness with which the government is considering the matter of national security in relation to foreign investment,” Mendelsohn said of the new laws.
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