China's growing assertiveness led Australia to block grid sale

Reuters

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Australia blocked the sale of a major power grid company to Chinese interests in part over concerns that China, its biggest trading partner, is becoming a geo-political threat, a senior member of Australia’s government said.

Treasurer Scott Morrison, from the country’s pro-business center-right coalition, halted the A$10 billion ($7.7 billion) sale of Ausgrid to government-owned State Grid Corp of China and Hong Kong’s Cheung Kong Infrastructure Holdings on Thursday, citing national security issues.

“The South China Sea disputes, the increased recognition that the Chinese regime is more authoritarian than we originally thought and the fact we are dealing with a state-owned enterprise; those three things have suspended people’s free-market instincts,” a senior member of Australia’s ruling coalition told Reuters.

While China’s growing militarization of the South China Sea has been a source of rising diplomatic and military tension with neighbors and the United States, the Australian decision indicates that trade matters could also be caught up in developments.

Last month, an arbitration court in The Hague ruled China did not have historic rights to the South China Sea, where it has built airstrips and other structures on disputed islands and artifically reclaimed land. China has rejected the court’s ruling.

The Ausgrid intervention came shortly after an eleventh-hour move by British Prime Minister Theresa May to delay a final decision on building a nuclear plant part funded by China.

Some fear blocking the Ausgrid deal will damage relations with a vital trading partner and disrupt the sale of other state-owned assets and private deals involving foreign bidders.

The China state-owned news agency Xinhua said on Friday that the decision was a “another demonstration of (Australia’s) obscure and inconstant strategy towards Chinese investors.”

“If Australia keeps sending mixed signals to Chinese bidders, it would eventually cast the impression as an unpredictable investment environment to Chinese buyers as well as other potential investors.”

(REUTERS)