Blocked bids in Australia
Australia’s Treasurer Scott Morrison on Friday officially rejected a bid by China’s State Grid and Cheung Kong Infrastructure Holdings to buy a major stake in Ausgrid over national security concerns. This is the latest sign of mounting protectionism in Australia.
Economic and business ties between China and Australia have always been interdependent and mutually beneficial. But as Australian authorities increasingly interfere in business activities, the economic cooperation between the two countries will certainly be impacted.
Business is business and any further economic cooperation between the two nations should naturally be based on business interest. But this will be far from enough given the current situation. Better economic ties between China and Australia also require a stable political environment. In fact it is the politics which determines the domain of the economic interactions between the two nations and how much further the economic ties can go.
This latest rejection by Australia of a Chinese bid is not an isolated case. Earlier this year, Australia blocked the sale of S. Kidman & Co, the country’s largest cattle rearing company, to a Chinese investor on similar concerns about national security and national interest.
Given that this is not the first time Australia has interfered in business issues, the latest rejected bid will likely not be the last one. If politics continue to get in the way of business, China and Australia will fall into a trap of warm economic ties amid cooling political relations, a situation that cannot be sustained. For example, China and Japan enjoyed steady economic ties despite strained political relations, but could not avoid chilling economic ties in the face of cooling political relations. Except for 2014, China’s imports from Japan fell between 2011 and 2015 while exports to Japan dropped for the third year in a row in 2015. Now, it appears the bilateral relations between China and Australia may face similar challenges.
Although political relations between China and Australia have not totally cooled, the repeated blocking of bids risks further damaging the political relations be- tween the two nations. Already, on the South China Sea issue, Australia has followed closely with the US in pursuing provocative freedom of navigation and patrols in the South China Sea. Such a stance will easily erode the foundation of political and economic ties between the two nations. It would be unwise for Australia to let politics interfere with business. Currently, China is Australia’s largest trade partner and its top export market. Australia is China’s biggest supplier of beef, wool, barley and other agricultural produces apart from iron ore. This trade with China accounts for about 20 percent of Australia’s foreign trade and has been responsible for creating a trade surplus of $ 33.32 billion for the country. The Chinese market provides huge opportunities for Australia to boost its economy. Despite the fact that China is Australia’s largest trade partner, Chinese investment only accounts for 4 percent of Australia’s total foreign investment. Last year, China and Australia signed a free trade agreement ( FTA), which covers fields including goods, services and investment. According to an estimate by the Australian Centre for International Economic Studies, the FTA will boost Australia’s GDP growth by 0.7 percentage points compared with China’s expected GDP growth of 0.1 percentage points, bringing a bigger boost to Australia’s economy than to China’s. Given the broad scope of economic cooperation between the countries, Australia’s interference will inevitably impact the climate for future economic cooperation. If that happens, the pressure Australian firms will have to bear will surely be larger than Chinese businesses.
Business is business, but that does not exclude concerns about politics. What matters most is that politics should promote bilateral relations between the two nations by aiming to bring more opportunities to both countries, or at least not become a hurdle to further development. Given that a stable political environment can bolster economic ties, hopefully Australia can appreciate the benefits of a bilateral economic relation with China and be far- sighted in its actions. Barring Chinese investment over security concerns will bring more damage to the Australian economy than any small
gains.