UK, Oz wary of Chinese interests
Plug pulled 0n $15bn deals
CHINA’s infrastructure investors have had a tough two weeks, with plugs being pulled on at least $15 billion (R200bn) of potential deals in nuclear power and electricity distribution.
Britain and Australia refused to sign off on investments where state-owned Chinese companies were ready to provide much-needed funding.
In both cases, the longterm utility programmes were halted in the later stages, stunning participants. Those in the UK were all set to join a signing ceremony when the announcement came.
“As China’s diplomatic policies become more and more assertive, there’s a trend that these countries are gradually enhancing their vetting on Chinese investment,” said Tao Jingzhou, a managing partner at Dechert in Beijing. “This is an attitude change.”
Chinese firms amid a record overseas spending spree are buying foreign utilities at the fastest pace in eight years, according to data.
Infrastructure deals, especially, are set to come under increased scrutiny by incoming governments wary of giving China access to their nations’ critical networks.
Infrastructure deals, especially, are set to come under increased scrutiny.
UK Prime Minister Theresa May’s government is reconsidering a plan to build Britain’s first nuclear power facility in more than 20 years.
China General Nuclear Power Corporation had agreed to pay for about one-third of the £18bn (R313bn) project, which has been progressing for years. May’s administration said last month that it wanted more time to study the deal.
One of May’s advisers, Nick Timothy, warned last year that China’s involvement in nuclear projects might allow it to “shut down Britain’s energy production at will”.
Yesterday, less than two weeks after the UK decision, Australia treasurer Scott Morrison said a proposed sale of the Ausgrid electricity network could endanger national security.
Government-owned State Grid Corporation of China was vying with Hong Kong billionaire Li Ka-shing for control in a deal worth more than A$10bn (R103bn), people familiar with the matter said earlier. Both had submitted binding bids.
“The more assertive a country makes its foreign policy, the harder it will be for partners like Australia to accept its foreign investment,” said Peter Jennings, the executive director of the Australian Strategic Policy Institute. “It is a difficult message for China to receive, but a necessary one.”
China has been reclaiming reefs in the South China Sea, and an international tribunal ruled last month that the nation’s efforts to assert its control there exceeded the law. Australia and the US were among the nations urging China to respect the ruling.
Any government wariness to infrastructure deals may pose a threat to similar transactions involving Chinese buyers. State-backed China Huadian Corporation was planning to offer about A$5bn for Australian electricity generator Alinta Energy Holdings, people familiar with the matter said in July.
In the UK, Chinese investors, including sovereign fund China Investment Corporation, might join buyers pursuing a controlling stake in National Grid’s domestic gas network, people with knowledge of the matter said earlier this month.
Getting control of technological know-how and industrial expertise is part of President Xi Jinping’s plan to transform China’s manufacturing base into one driven by high-end production and away from staples like textiles production. – Bloomberg