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Playing the China card may win votes, but it’s bad for Australia

By James Laurenceson - posted Monday, 30 March 2015


Sending mixed messages to China

The federal government's recent crackdown on foreign investment in the real estate sector has been widely seen as singling out Chinese investors, with some even calling it "racist".

And it was in no small part a response to growing Chinese interest in Australia's agricultural sector that since the start of this month, the FIRB screening threshold for foreign purchases of rural land was slashed from A$252 million to A$15 million. The government also plans to reduce the threshold for foreign investment in agribusinesses from A$252 million to A$55 million.

Australia is sending very mixed messages to potential investors – because it's one set of rules for some, and another for others.

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These tighter new foreign investment rules apply to investors from countries that have recently signed Free Trade Agreements (FTAs) with Australia, such as Japan, Korea and China. But they don't apply to countries with older FTAs such as the US, New Zealand and Chile. Investors from the latter countries only need to seek approval if their purchases of Australian rural land or agribusinesses exceed A$1.09 billion. That's 73 times the threshold facing Chinese investors for rural land and 20 times that for agribusinesses.

Here are some messages that Australian politicians of all stripes should be delivering to a wary public.

Chinese investors can't buy any assets that Australians don't want to sell.

But if Australians do want to sell, then the benefits of having Chinese bidders is overwhelming. In the case of the NSW electricity grid, if you arbitrarily exclude some buyers, you risk getting a lower price for these taxpayer-owned assets.

Australia has a strong regulatory framework. That goes beyond the Foreign Investment Review Board; we also have tax laws, labour laws and environmental laws that apply to domestic and foreign firms alike.

China brings more dollars and more jobs to the Australian economy than any other country.

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And as noted earlier, while Chinese investment is growing, it has a long way to go to catch up with other nations such as the US.

Earlier this week, the National Australia Bank and the Australia-China Business Council released research showing that in 2011, direct trade with China contributed 5.5% of Australia's Gross Domestic Product. Since then, trade with China has jumped a further 25%.

China currently buys more than double the value of our goods and services than does our second largest customer, Japan.

China also buys A$55 billion more than we buy from them.

Polling just released by the Australia-China Relations Institute shows that Chinese business leaders still regard Australia extremely highly as a country in which to invest. We would be wise not to take that for granted.

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This article was first published on The Conversation.



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About the Author

James Laurenceson is Deputy Director and Professor, Australia-China Relations Institute (ACRI) at University of Technology, Sydney.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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