Ausgrid: Chinese commentators caution against China-phobia

The bar on Chinese electricity bidders has raised concerns an anti-globalisation tide is threatening China’s progress.

Analysts say there is a fear factor working against Chinese companies.

The government’s bar on State Grid and Cheung Kong from NSW electricity assets has played into a rising concern in China that an anti-globalisation tide, encompassing elements from Brexit to the opposition to trade deals by both US presidential candidates, is threatening its own march to prosperity.

This will take centre stage at the G20 summit chaired by President Xi Jinping alongside Hangzhou’s ancient West Lake early next month, where Malcolm Turnbull is expected to attend.

The veto from Scott Morrison also deepens a sense of fatalism among some of the most experienced Australians running businesses in China that runs of better fortune — exemplified by the China-Australia Free Trade Agreement and the successful visits this year to China of the Prime Minister and a thousand Australian businesspeople — tend to run into the sand before too long.

Hong Kong’s business community is bewildered that the huge global company Cheung Kong, still controlled by corporate patriarch Li Ka-shing, might be perceived as an undefined security risk. It runs parts of the power grids in Melbourne, Wellington and London.

The company itself said: “We believe that the Australian government must have reasons beyond the obvious.”

More than 90 per cent of the company’s profits are generated outside Hong Kong and China — with massive contributions from a wide range of operations in Australia, and the company, as it has taken pains to point out, is incorporated in Bermuda.

China’s biggest distributor, State Grid, already has billions of dollars tied up in Australia. It has a stake in Victorian distributor AusNet Services and gas and power network Jemena.

It is even a part shareholder in Canberra’s electricity grid.

The Treasurer’s move will stoke memories of 1999. The then South Australian opposition leader, Mike Rann, said when Li Ka-shing’s other major corporate vehicle, Hutchison Whampoa, bought into power distribution there: “I guess what people want to know is if they flick on their switch to their power, would the Red Guards be rejoicing?”

Luo Jun, a commentator with Chinese official news agency Xinhua, said: “Given China’s dramatic development, huge population and unique culture, it is understandable for some countries to have concerns over China’s role and impact on the world.

“However, such concerns, if brewed in fear and bias, could transform into a toxic mindset of China-phobia.”

He noted the delay of a China-invested nuclear power project at Hinkley Point in England, about which “national security” concerns were also raised.

He said: “To suggest that China would try to kidnap the countries’ electricity network for ulterior motives is absurd and almost comical — since reputation is critical to any corporate activity. It’s also ridiculous to suggest that Chinese enterprises would risk their credit ratings and commit suicide on the world stage by threatening to deny the Australian and British public’s electricity.”

Chinese investment abroad, he said, was “not a zero-sum game,” but a promise of co-operation.

Mei Xinyu, a researcher at the Commerce Ministry, told The Weekend Australian: “I think the Australian government is over-­apprehensive. It is merely a commercial deal, aimed at return on investment.

“The production costs for State Grid have increased a lot at home in recent years due to pricing restrictions, and it faces pressure to improve its returns, so it has to seek overseas investments.”

He added: “At present, state-owned enterprises are undergoing reform. If they fail to become ‘bigger and stronger’, they might be forcibly merged into other companies, so they have a strong incentive to invest abroad.

“The Australian government is making a fuss over nothing, mistaking a commercial deal for a political event. And it will be Australia who suffers in the end. As for the Chinese public — they have seen many similar cases, and do not ­really care about them.”

Zha Daojiong, an economics professor at Beijing University, said the rejection “seems to fit into a general pattern of de-globalisation that is going on around the world. ‘National security’ is a very convenient phrase to pick for justification.

“But assuming that the electric power sector in Australia — in NSW or elsewhere — continues to have an interest in Chinese power generation and transmission industries, one possibly effective way to assess the provable national ­security connection would be to ask to be allowed to invest in those industries in China.

“Out of that sort of exercise, perhaps the two sides can develop some road maps for reciprocal treatment.”

Udo Doring, chief executive of the Australian Chamber of Commerce in Shanghai, said: “We believe Australia should welcome and encourage Chinese investment into key sectors of the Australian economy. But it is difficult to assess the wisdom of the government’s decision to block the sale of Ausgrid when the detail of those concerns is not disclosed.”

Peter Arkell, a prominent Shanghai-based Australian consultant who was until recently chairman of the chamber, said: “I find it disappointing that Chinese investment in Australia gets kicked around like a footy.

“This decision is baffling on a number of fronts. The bidders have every reason to be frustrated. While the requirements of the Foreign Investment Review Board process are understood, they (the companies) have invested much time and money with encouragement from leaders and officials in Australia.

“Investors understand risk, but their decisions to proceed are calculated on the prospects of positive outcomes. With risk loaded to the end of the process, investors will move off to other markets. (It’s) cheaper to fall at the first hurdle rather than the last.”

He added: “We are well placed to be an attractive investment destination because we have many of the commodities that will help China to manage its resource and food security, we have the unbeatable good fortune to be in the same time zone as China. But we are not the only show in town. Today China is regarded by countries around the world as a source of investment capital.

“Is there a fear factor of the Chinese coming to Australia and a fear factor of us investing here? Yet, surveys of Australian business on the ground here in China are consistently saying that there is a positive business outlook for companies in China and for the economic outlook. Frankly, the pushback is very tough to explain to Chinese investors.

“Perhaps the emergence of the Xenophon and Hanson blocks in the Senate presenting anti-free trade and investment sentiments has given the Treasurer a bad case of nerves. Corporations need to be speaking loudly and clearly that this negative view is short-sighted and not in Australia’s long-term interest. The business community cannot let the negative political fringe present populist arguments that deny the nation the wealth that will come from a sensible China engagement.”

Arkell said ChAFTA “was a terrific achievement. It is just the starting point, though. We need to get cracking and make every post a winner. This decision by the Treasurer is a very sad setback.”

Michael Wadley, a leading Australian corporate lawyer in China, said the decision was “not bizarre but consistent with the confused picture emanating quite unnecessarily from the government”.

He said: “The Chinese understand a government saying no and calling the shots. It’s called being a ruler. What they don’t get is this opaque waffle process. Just draw a line and say that acquisitions by Chinese in certain sectors are ­either not allowed or only allowed by exception.

“Delineate the industry areas and if they want, minimum dollar figures. Retain the right of Treasury to approve exceptions but start with a negative list.

“There’s a Chinese thought, that they — and the Americans — would understand.”

As the Commerce Ministry’s Mei said, the Chinese public has not engaged with the Ausgrid issue — and rarely does with such economic controversies, since it tends to feel disengaged with them even at home, where the government dominates all such debates.

And while some Chinese have been caught up in the controversies from the Olympic Games, this is only part of a broader picture of angst that tends to be initially government-driven, about many other countries near and far.

The website of the Communist Party’s chief voice, People’s Daily, for instance, includes articles lambasting “the USA’s hypocritical double-standard on human rights … Japan shamelessly accusing China of jeopardising regional stability, playing up to the ‘China Threat’ for its own right-wing agenda … South Korea will — by installing an antimissile defence system — bring catastrophe to the Korean Peninsula and destroy the hard-won political mutual trust with its neighbours in North Asia … A woman from Guangzhou in China’s south found the words ‘f..k you’ written on her passport after she handed it to Vietnamese border guards, on the pages including the map with the 9-dash line showing China’s South China Sea rights … The Chinese-British relationship is at a crucial historical juncture and mutual trust should be treasured even more …”

These are among pointers to a perfect storm brewing over globalisation and regional security — in which the Ausgrid decision is being perceived as a part of a large dystopia jigsaw.