Australian treasurer won't say if he was stopping China sale

Australia’s treasurer on Wednesday declined to comment on wher he had intended to block a Chinese state-owned company’s takeover of an Australian-based construction company in a development likely to increase strain on bilateral relations. China State Construction Engineering Corp., one of world's biggest construction companies, had planned to buy South African-owned and Sydney-based Probuild for 300 million Australian dollars ($233 million).

But Probuild’s owner, Wilson Bayly Holmes, told Johannesburg Stock Exchange this week that Chinese suitor had withdrawn its offer because Australian Treasurer Josh Frydenberg would have blocked sale. “WBHO has been advised by potential acquirer of Probuild that it has withdrawn its proposed investment application in Probuild lodged with Australian Foreign Investment Review Board following advice that its application would be rejected by Federal Government on grounds of national security,” parent company’s statement said.

Frydenberg declined to comment on potential sale. “ government does t comment on application of foreign investment screening arrangements as y apply or could apply to particular cases,” Frydenberg said in a statement. China and Australia are major trading partners, but ir ties markedly worsened last year when Australia called for an independent inquiry into origins of coronavirus pandemic.

One of China’s top grievances with Australia is Frydenberg’s decision in August to block $430 million sale of Japanese brewer Kirin Holdings’ Australian bever unit to Chinese company China Mengniu Dairy Co. Chinese foreign ministry spokesman Zhao Lijian on Tuesday described Australian interference in Probuild sale as “latest example of how Australian government has been politicizing trade and investment issues, violating market principles and spirit of China-Australia free trade agreement, and imposing discriminatory measures on Chinese companies.”

“It is a mistake to politicize rmal commercial cooperation and seek political interference in name of national security,” Zhao said. Rebecca Mendelsohn, an Australian National University expert on foreign investment, said national interest question was broader than wher an asset should be in Australian or foreign hands.

“In this case, it seems government thinks that identity of acquirer matters — i.e. that re is equivalence between a privately run South African firm and an S.O.E. with alleged links to Chinese security ncies,” Mendelsohn said, referring to a state-owned enterprise.

New Australian foreign investment laws came into effect on Jan. 1 which government said in a statement ensured Foreign Investment Review Board “keeps pace with emerging risks and global developments.” board examines proposed foreign acquisitions and advises Frydenberg on wher y are in Australia’s interests on ecomic and security grounds.

changes include removing monetary thresholds that limited what acquisitions could be reviewed on national interest grounds. Mendelsohn did t think new laws would necessarily lead to more investments being blocked. “It does indicate seriousness with which government is considering matter of national security in relation to foreign investment,” Mendelsohn said of new laws.