{"id":58745,"date":"2020-09-02T06:00:37","date_gmt":"2020-09-01T20:00:37","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=58745"},"modified":"2020-09-01T18:52:40","modified_gmt":"2020-09-01T08:52:40","slug":"why-the-decision-to-reject-chinas-bid-for-lion-dairy-matters","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/why-the-decision-to-reject-chinas-bid-for-lion-dairy-matters\/","title":{"rendered":"Why the decision to reject China\u2019s bid for Lion dairy matters"},"content":{"rendered":"
\"\"<\/figure>\n

Treasurer Josh Frydenberg ended the prospects of Japan\u2019s Kirin group selling its $600\u00a0million Australian Lion Dairy and Drinks business to Chinese dairy firm Mengniu when he gave<\/a> his preliminary view that the sale \u2018would be contrary to the national interest\u2019.<\/p>\n

It was a good decision, even if the officials who advise the Foreign Investment Review Board may not have been as clear-eyed as the treasurer was on the matter.<\/p>\n

Mengniu\u2019s primary shareholder is the huge Chinese state-owned enterprise China National Oils, Foodstuffs and Cereals Corporation<\/a>. France\u2019s Danone group also has shares in Mengniu.<\/p>\n

Why might the treasurer have made this decision instead of letting a big commercial transaction go through? And who cares if this enterprise is in Japanese or Chinese hands? I can\u2019t read his mind, but the decision logic does seem likely to have had a particular flow.<\/p>\n

Neither Kirin nor the Japanese government has been threatening and coercing Australia with trade and economics. They are unlikely to start doing so any time soon.<\/p>\n

In contrast, the Chinese government is engaging in public<\/a> and coercive trade<\/a> measures against Australian companies to pressure the Australian people and government to stop acting in our national interests. So, not all foreign owners are created equal, despite our government\u2019s \u2018country agnostic\u2019 talking points.<\/p>\n

Chinese government officials in Beijing and Canberra have made open threats to use trade and economics as weapons against Australia because our government has made decisions that the leadership in Beijing doesn\u2019t like, but which have influenced international debates\u2014from 5G to the Covid-19 pandemic. Wine and barley exports to China have been early and obvious victims.<\/p>\n

Much of the recent debate has been about China\u2019s trade power with Australia. However, Australia has leverage in trade and economics too, because we\u2019re a high-quality producer of competitively priced goods and services that China really needs\u2014not just iron ore, LNG and coal.<\/p>\n

Food security is a pressing and growing problem<\/a> for Beijing, as its population ages, as demands from its wealthy middle class increase, and as its arable land becomes less productive because of pollution, development and climate change.<\/p>\n

Along with food security, food safety<\/a> is a priority of Chinese consumers. China\u2019s dairy industry has had safety scandals\u2014from polluted baby milk formula to melamine in liquid milk (Mengniu Dairy was one of the companies involved in the latter scandal<\/a>).<\/p>\n

Aside from the Lion purchase boosting Mengniu\u2019s business, the Chinese Communist Party leadership would see it as making political, strategic and economic sense because it\u2019s about both food security and food safety.<\/p>\n

Overall, then, this is more important than a simple commercial transfer of ownership from a Japanese to a Chinese company, particularly if it\u2019s an indicator of further changes in the same direction.<\/p>\n

For Australia, the economic benefit from the ownership transfer isn\u2019t clear. In fact, there\u2019s potential for Mengniu to simply not increase prices paid to Australian dairy farmers and other suppliers but instead use its growing market position to keep pressure on prices and take the profits from sales to wealthy middle-class consumers in China.<\/p>\n

Leverage on our trade and economic engagement is not a one-way system controlled in Beijing. Frydenberg\u2019s handling of the transaction sends a message that Australia has leverage and is willing to use it. It\u2019s a demonstration that Beijing\u2019s continuing coercion of Australia and Australian companies can have consequences that matter to China, as well as for its companies\u2019 global growth ambitions.<\/p>\n

Australia has a long track record as an advocate for free and open trade and investment, so the fact that our economic and trade calculations are changing in the face of Chinese economic coercion is a signal to others trading with China that they too need to reassess their previous policy assumptions.<\/p>\n

If Beijing\u2019s decision-makers are as rational on economics as David Uren suggests in a recent<\/a> Strategist<\/em> piece, the powerful logic of preventing further deterioration in China\u2019s access to Australia should help reduce Beijing\u2019s willingness to threaten and act against other Australian companies and industries.<\/p>\n

Fortunately, the Chinese government\u2019s leaders don\u2019t have to be as economically rational as Uren describes to think more carefully from here.<\/p>\n

Even under a \u2018limited rationality\u2019 scenario, it\u2019s just possible that the simple benefits to China\u2019s pandemic-hobbled economy from returning to positive engagement with Australia will make more sense in Beijing than insisting on the \u2018troubled marriage that is all your fault\u2019 line we heard most recently from Deputy Ambassador Wang Xining<\/a>.<\/p>\n

The other possibility, of course, is that none of this matters as much to Xi Jinping as being seen to be punishing the Australian government as a lesson to others. He and his advisers may see the pressure they\u2019re creating on Australia as empowering advocates for a return to our longstanding policy of increasing economic engagement with China while setting aside strategic differences.<\/p>\n

If so, Xi may be discounting four things: the now solid public sentiment<\/a> in Australia that the Chinese government cannot be trusted to act responsibly; the healthy bipartisan political understanding about the dangerous strategic direction China is taking under his leadership; the fact that coercion has the reverse effect on Australians to the one Beijing seems to expect\u2014it provokes resistance and counteractions, not acquiescence; and that the approach China is taking against Australia and others<\/a> is hardening attitudes towards Beijing internationally, notably in countries with similar interests and values to us.<\/p>\n

So, Frydenberg has been smart in two ways\u2014making a decision on Mengniu\u2019s takeover bid while letting others explain the logic that is most likely to have driven it, and leaving Beijing with the task of joining the dots.<\/p>\n

The next steps from Beijing will be clarifying moments, and not just for Australians and Australian policy on China.<\/p>\n","protected":false},"excerpt":{"rendered":"

Treasurer Josh Frydenberg ended the prospects of Japan\u2019s Kirin group selling its $600\u00a0million Australian Lion Dairy and Drinks business to Chinese dairy firm Mengniu when he gave his preliminary view that the sale \u2018would be …<\/p>\n","protected":false},"author":766,"featured_media":58747,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[2212,52,1182,365],"class_list":["post-58745","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-australia-china-relations","tag-china","tag-foreign-investment","tag-trade"],"acf":[],"yoast_head":"\nWhy the decision to reject China\u2019s bid for Lion dairy matters | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/why-the-decision-to-reject-chinas-bid-for-lion-dairy-matters\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why the decision to reject China\u2019s bid for Lion dairy matters | The Strategist\" \/>\n<meta property=\"og:description\" content=\"Treasurer Josh Frydenberg ended the prospects of Japan\u2019s Kirin group selling its $600\u00a0million Australian Lion Dairy and Drinks business to Chinese dairy firm Mengniu when he gave his preliminary view that the sale \u2018would be ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.aspistrategist.ru\/why-the-decision-to-reject-chinas-bid-for-lion-dairy-matters\/\" \/>\n<meta property=\"og:site_name\" content=\"The Strategist\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/ASPI.org\" \/>\n<meta property=\"article:published_time\" content=\"2020-09-01T20:00:37+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-09-01T08:52:40+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/09\/GettyImages-533882620-e1598950317311.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"768\" \/>\n\t<meta property=\"og:image:height\" content=\"447\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Michael Shoebridge\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:site\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Michael Shoebridge\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.aspistrategist.ru\/#website\",\"url\":\"https:\/\/www.aspistrategist.ru\/\",\"name\":\"The Strategist\",\"description\":\"ASPI's analysis and commentary site\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.aspistrategist.ru\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-AU\"},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-AU\",\"@id\":\"https:\/\/www.aspistrategist.ru\/why-the-decision-to-reject-chinas-bid-for-lion-dairy-matters\/#primaryimage\",\"url\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/09\/GettyImages-533882620-e1598950317311.jpg\",\"contentUrl\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2020\/09\/GettyImages-533882620-e1598950317311.jpg\",\"width\":768,\"height\":447,\"caption\":\"SYDNEY, AUSTRALIA - MAY 24: Fridges stocked with milk are seen in a Woolworths supermarket on May 24, 2016 in Sydney, Australia. 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