Why is Australia seeking to limit Chinese investment in the wake of their slowing economy?

Why is Australia seeking to limit Chinese investment in the wake of their slowing economy?
Source: WSJ


Australia is hoping to preempt predatory investments from China, one of the country’s main economic partners, amidst an economic slowdown.

Though China was the first country to be hit by COVID-19, reports indicate that the country’s economy is now rebounding just as the economies of other countries, including Australia, are seeing worsening effects.

Under President Xi Jinping, China has been increasing its global investment in countries all over the world. However, politicians in Australia, as well as the United States, have been eyeing China’s global economic moves with suspicion.

Concerns of a Chinese takeover

While the coronavirus outbreak began in Wuhan, China, it has since spread around the world.

Now, with China appearing to have contained the virus’ spread within its own borders, there are indications its economy is rebounding just as other nations are facing pandemic-related downturns.

Though the lasting effects of the COVID-19 pandemic are impossible to know currently, countries are attempting to grapple with all possible outcomes. One concern is that Chinese investors may take advantage of a downturn in other countries.

In Australia, where local politicians have had an at times contentious relationship with China, the government is taking steps to ensure foreign investors cannot supersede national interests through predatory behavior. The fear is that Chinese businesses could use business dealings with weakened Australian companies as a Trojan horse to push Chinese interests in the country.

Australia and China’s relationship

Source: Belt and Road Initiative

As global neighbors, the economies of China and Australia are intricately linked, with Australia’s GDP seeing a minor but noticeable decline when China’s GDP drops.

In the 2010s, Australia’s exports to China increased by AUS$78.5 billion, even while exports to the US and Japan slightly declined over the same time period.

Despite this symbiotic relationship, Australian politicians have stirred up controversy for their criticism of China. In 2019, Hastie and a fellow Liberal MP, James Paterson, were denied visas to China, which demanded the politicians “repent and redress their mistakes.”

In an August 2019 opinion piece in the Sydney Morning Herald, Hastie compared China’s growing economic and political influence to Germany’s pre-World War II advances. “Australia has failed to see how mobile our authoritarian neighbor has become,” he wrote.

In interviews, Paterson has also criticized China, specifically for its actions in Hong Kong during protests in 2019. Both MPs have refused to apologize for their remarks.

Source: Getty (Treasurer Josh Frydenberg)

Australian Prime Minister Scott Morrison and Liberal Party Members of Parliament (MPs) are taking steps to prevent such action, and Australia’s Foreign Investment Review Board (FIRB) has been directed to carefully scrutinize any foreign investment in Australian businesses and assets.

At the moment, it appears the move is mostly preemptive as the FIRB has reported no such cases. Nevertheless, Liberal MP Andrew Hastie has warned, “More than ever, we need to protect ourselves from geo-strategic moves masquerading as legitimate business.”

Declining investment in Australia

There has been concern in recent years that Australia is overly cautious about security issues as it relates to foreign investors.

In fact, Chinese investment in Australia has had a major impact on the latter country’s economy. When it drops, as it has in recent years, it can lead to decreased technological innovations and fewer jobs.

Australia’s coal and commercial real estate industries, in particular, have experienced the biggest declines in foreign investment.

China has lowered its investment in the US and Canada as well. Overall, though, China, whose economic policy is guided by President Xi Jinping’s Belt and Road Initiative, has been increasing its foreign investment globally.

America pushes back against China

Concerns over China’s economic expansion are shared by many in the United States. Over fears that the Chinese government is attempting to collect personal data on its citizens, the US has created barriers to Chinese access to US technology and data. Those barriers will limit how much China can invest in the US.

Under President Donald Trump, the US has been locked into a trade war with China since July 2018. Trump has accused China of unfair trade tactics, including manipulating the value of currency. However, in January 2020, the two countries signed a trade agreement intended to ease the tensions, though some of the trade war’s tariffs remain in place.

China’s economic slowdown

Source: AP

In February, the effects of the pandemic were being felt throughout China. Foreign investment in the country had declined by more than 25% compared to the same period in the previous year. With China being the first country to lock down many of its citizens, the country’s manufacturing and service industries took immediate hits.

China’s economic slowdown was already in part responsible for a global economic slump, with major tech companies and other global corporations experiencing downturns. As China has made moves over recent decades to become a bigger actor on the global stage, events that impact its economy have affected other countries as well.

Earlier this year, with millions of its citizens under lockdown, the country’s need for oil diminished. This drop in the Chinese demand for oil was largely responsible for sending Saudi Arabia and Russia into an oil price war. Both countries refused to reduce their oil output, which led to the price of oil plummeting.

[article_ad]

Have a tip or story? Get in touch with our reporters here!