{"id":28230,"date":"2016-08-17T15:00:43","date_gmt":"2016-08-17T05:00:43","guid":{"rendered":"http:\/\/www.aspistrategist.ru\/?p=28230"},"modified":"2016-08-17T14:57:32","modified_gmt":"2016-08-17T04:57:32","slug":"roar-paper-kitten","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/roar-paper-kitten\/","title":{"rendered":"The roar of the paper kitten"},"content":{"rendered":"

\"Image<\/a><\/p>\n

Australian governments generally like to be front of mind in Beijing. But the heightened level of Chinese government awareness of things Australian, as evidenced by the editorial run by The Global Times<\/em><\/a> on 30 July 2016, is perhaps not quite the kind of attention that Foreign Minister Bishop courts.<\/p>\n

Australia\u2019s ever-so-slightly-muscular joint statement, with Japan and the US<\/a>, on the need for China to heed the Arbitral Tribunal\u2019s determination on the validity of China\u2019s South China Sea claim provoked shock-jock journalism that would certainly pass muster in some of Australia\u2019s more flamboyant tabloids. Of course, had the Global Times editorialist a more subtle sense of humour, he might have labeled Australia a \u2018paper kitten\u2019 instead of a \u2018paper cat\u2019\u2014if only for reasons of prosody.<\/p>\n

Mack Horton\u2019s spirited comments on Sun Yang\u2019s drug history at Rio de Janiero\u2019s Olympic pool elicited an equally cringe-worthy \u2018fake news\u2019 response from the Chinese swimming team\u2019s manager\u2014at least as reported by China Radio<\/a> International on its English language website. So, irrespective of how Australia might be succeeding in its bilateral diplomacy, we are certainly performing well on the attention-seeking front.<\/p>\n

The government\u2019s decision to reject the joint bid between Hong Kong\u2019s Cheung Kong Infrastructure Holdings (CKI), controlled by Li Ka-shing, and China\u2019s state-owned State Grid for NSW\u2019s power distribution network, Ausgrid, extends this new malaise into the field of foreign direct investment. While it elicited a less excited commentary from China\u2019s official mouthpiece<\/a>, the Xinhua News Agency, it certainly attracted attention.<\/p>\n

The rejection of the Ausgrid bid sends mixed messages, however. Why, one might ask, would the government wave through a ninety-nine year lease by a Chinese state-owned enterprise on the Port of Darwin\u2014clearly a strategic asset\u2014when a bid by a commercial consortium is refused on so-called security grounds? Why, one might also ask, was it permissible for Li Ka-shing\u2019s CKI to purchase a majority stake in South Australia\u2019s poles and wires? Is the welfare of South Australians of less security concern than that of their NSW cousins?<\/p>\n

This is where the government displays caution rather than confidence, capriciousness rather than consistency and confusion rather than capacity\u2014all of which could be interpreted as populist xenophobia with a tinge of political opportunism. Moreover, to shelter behind opaque \u2018security concerns\u2019 extends the lack of transparency and accountability that distinguishes the management of Australia\u2019s refugee policy to the management of foreign direct investment.<\/p>\n

The government\u2019s Ausgrid decision is further evidence of the bipolar disorder that sits at the centre of Australia\u2019s China policy, brutally expressed by former Prime Minister Tony Abbott as \u2018fear and greed<\/a>\u2019. If Australia is to continue to advocate the need for a rules-based international order as the critical underpinning of global political relationships, consistency would demand a domestic rules-based approach to economic and investment relationships. Quite simply, the rules must be clear.<\/p>\n

Whether we like it or not, the fact is that many Chinese individual and corporate investors are attracted to Australian assets, be they urban real estate holdings, ports, agricultural land, pastoral leases, iron ore and coal mines, ports or transmission grids, because they want to hedge their exposure in China and in other markets.<\/p>\n

Increasingly, Chinese investors are encouraged by the reliability of our legal system\u2014to which they exercise increasing recourse\u2014and the clarity of the regulations that underpin corporate, commercial and investment practice in Australia. They are also encouraged by the profitability of infrastructure assets in a largely unregulated market\u2014a matter of increasing concern to the Australian Competition and Consumer Commissioner<\/a>.<\/p>\n

Rules matter. So does consistency. So too does national security. Given Australia\u2019s reliance on foreign direct investment in maintaining economic growth, it is essential that the foreign investment guidelines are clear, equitable and non-discriminatory. To this end, it is equally important that any national security guidelines relating to foreign direct investment are at least as clear as those relating to entry to Australia by political extremists and others who might threaten harmony and security.<\/p>\n

And this is where the problem lies: the national security principles that might inform consideration of foreign direct investment bids are totally invisible, if they exist at all. So companies that might be interested in bidding for infrastructure assets, and spending the considerable sums involved in preparing the associated documentation, are effectively flying blind. While it may be reasonable for the Treasurer to declare that, since he is the only one at a media conference holding the appropriate security clearances, he cannot divulge the precise reasons<\/a> for rejecting a bid, it is not reasonable that the security ground rules are \u2018unknown unknowns\u2019.<\/p>\n

It may be amusing that Australia now carries the \u2018paper kitten\u2019 title. But it is counterproductive for Australia to act as though it is a paper kitten, toying with major investment decisions on a whim. Paranoia about China\u2019s ability to shut down the entire NSW electricity grid is not a sound basis for considering bids from Chinese investors. Evidence that China has the intention to do so is. We evidently have some way further to travel in building a mature economic relationship with Asia\u2019s economic powerhouse.<\/p>\n

As China slowly redefines itself<\/a> in the aftermath of the \u2018century of humiliation\u2019, it will increasingly recalibrate its relationships with the West. Australia is both big enough and small enough to find itself a convenient whipping boy or, as Gideon Rachman recently wrote<\/a> in the Financial Times, a lightning rod for a more generalised disaffection with the West.<\/p>\n","protected":false},"excerpt":{"rendered":"

Australian governments generally like to be front of mind in Beijing. 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