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

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But Probuild’s owner, Wilson Bayly Holmes, told the Johannesburg Stock Exchange this week that the Chinese suitor had withdrawn its offer because Australian Treasurer Josh Frydenberg would have blocked the sale. “WBHO has been advised by the potential acquirer of Probuild that it has withdrawn its proposed investment application in Probuild lodged with the Australian Foreign Investment Review Board following advice that its application would be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

Frydenberg declined to comment on the potential sale. “The government does not comment on the application of the foreign investment screening arrangements as they apply or could apply to particular cases,” Frydenberg said in a statement. China and Australia are major trading partners, but their ties markedly worsened last year when Australia called for an independent inquiry into the origins of the coronavirus pandemic.

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

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

“In this case, it seems the government thinks that the identity of the acquirer matters — i.e. that there is no equivalence between a privately run South African firm and an S.O.E. with alleged links to Chinese security agencies,” Mendelsohn said, referring to a state-owned enterprise.

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

The changes include removing monetary thresholds that limited what acquisitions could be reviewed on national interest grounds. Mendelsohn did not think the new laws would necessarily lead to more investments being blocked. “It does indicate the seriousness with which the government is considering the matter of national security in relation to foreign investment,” Mendelsohn said of the new laws.