The Australian government has decided to block an AUD 300 million takeover offered by a Chinese state-owned company for a local building contractor named Probuild. The government has cited National Security as the grounds of negative assessment. On January 1, tough new foreign investment rules (FIRB) came into force, and this decision is the first by Canberra under the new rules.
With FIRB, Canberra has greater powers to review proposed investments by foreign bidders. It will ensure compliance with approval conditions laid down by the government and has the power to order divestment.
Hans Hendrischke, a professor of Chinese business and management at the University of Sydney Business School, said that the decision is a sign of tougher scrutiny of Chinese investment in the country. He said, “The Treasurer’s rejection of the takeover bid for the South African-owned Probuild by China State Construction Engineering Corporation is a sign of tougher scrutiny of Chinese investment under the new FIRB regulations which now incorporate national security as a specific element in the screening process.”
He further added that Canberra might have blocked China State Construction Engineering Corporation Ltd. (CSCEC) after Washington decided to list it on “Communist Chinese military companies” in August last year. Washington had barred US investors from owning shares in the listed companies.
Australia had barred Huawei 2018
In 2018, the Australian government had barred Huawei from providing 5G equipment in the country. Later in 2020, Huawei announced that it had cut ties with the Canberra raiders. At that time the company cited the ban on 5G equipment and the Australian government’s attitude towards the Chinese companies.
Australia’s call for an inquiry in Wuhan outbreak
In May 2020, Australia, along with members of the European Union, had called for an independent inquiry into the Covid-19 outbreak in Wuhan. In December last year, Australia had again insisted on WHO inquiry into Covid’s origin. It said that it expects, “robust, independent and comprehensive evaluation of the Covid-19 response, and to strengthen WHO’s ability to prevent, mitigate and respond to future pandemics.”
Fall of Chinese investment in Australia
After Australia banned Huawei from providing 5G equipment in Australia and introduced foreign interference laws, the Chinese investment in the country has declined. As per the report issued by the University of Sydney Business school and KPMG, in 2018, Chinese companies had invested AUD 8.2 Billion, which came down to AUD 3.4 Billion in 2019.
‘It’s all political’, says Simon Gray, Probuild’s executive chairman
Simon Gray, Probuild’s executive chairman, said that the decision made by Canberra is political. He claimed that his company undertook less sensitive work compared to rival John Holland that was acquired by China Communications Construction Company in 2015 for AUD 1 Billion. He said, “It’s more politics than anything else. No one can give us a real reason why we’re a national security risk. It’s a joke.”
Buildings that Probuild has raised include Victorian Police headquarters and Melbourne headquarters of biotech company CSL, producing the Covid-19 vaccine. It is believed that these factors were also considered during the review.
Frydenberg’s office refused to comment
A spokesperson for Treasurer Frydenberg said that the government does not comment on the applications of the foreign investment screening arrangements.
CSCEC has withdrawn the offer after Canberra’s review.