Commentary: Mixed messages from Australia stumps Chinese investments

Changing foreign investment rules caused by the seemingly discriminatory, xenophobic Australian politics is starting to frustrate Chinese investors who only want a level playing field in a fair, open and competitive marketplace.

The world's economy continues to be plagued by the hangover of the U.S.-induced Global Financial Crisis, with the burden, it seems, placed on China's economy and its increasing investment dollar to help sustain global growth levels.

While Australia says it welcomes Chinese investment and wants to increase bilateral trade, actions seem to be speaking louder than words following recent knee-jerk reactions by political leaders for popularity reasons that now risks their transition from mining led growth.

POLITICAL REACTIONS

Australia's foreign investment regime changes appear reactive to China's investment into a country that has burgeoning business opportunities under open, established rules and what is now arguably a transparent political process.

The long-term lease of Darwin's port to Chinese-backed Landbridge flamed the internal political debate surrounding direct foreign investment into Australia, focusing on the Chinese, a re-incarnation of similar debates regarding U.S. and Japanese investments over Australia's history.

After Australia's Prime Minister Malcolm Turnbull was publicly derided by U.S. President Barack Obama over the issue - Australia houses a rotating deployment of U.S. Marines in Darwin - Australian Treasurer Scott Morrison rushed to the cameras claiming foreign investment rules would be reviewed.

Under current Australian law, assets owned by Australian states are not subject to approval by the Foreign Investment Review Board (FIRB), however Australia's defence officials had consulted with the Northern Territory government over the long-term lease and found no issue.

On the same day, Morrison declared Australia's largest cattle ranch, S. Kidman & Co, could not be sold to a foreign bidder, citing Australia's national interest.

The two bidders at the pointy end of negotiations were both Chinese who see the potential of Australia's agriculture industry and were prepared to pay upwards of 350 million Australian dollars for the ranch.

While the Kidman operation encroaches on part of Australia's Woomera defence testing area - which is now likely to be excluded from the sale - Morrison also noted the 2.5 percent agricultural land holding in his statement.

"This is a significantly larger than the next biggest rural landholding in the country," Morrison said.

This is despite larger producers than Kidman's 185,000 head of cattle being owned by foreign interests in higher rainfall areas of Australia.

As a special arid zone cattle producer, the Kidman operation requires large swathes of land.

It's understood the relevant parties are now undergoing consultations to salvage the sale.

FARMLAND OWNERSHIP

Ownership of Australia's farmland has entered the local political debate in recent years amid concerns foreign interests are purchasing properties to capitalize on growing demand for higher quality products in Asia.

However Australia's business council has said up to 1 trillion Australian dollars of foreign investment is needed by 2050 for Australia's agriculture industry to meet its full potential and meet demand.

The passing of new regulations through Australia's parliament on Tuesday that were designed to appease local interests is likely to hinder that growth.

Chinese investment into agriculture that exceeds 15 million Australian dollars - down from 252 million Australian dollars - are now forced to be reviewed and approved by the FIRB.

However, other countries are exempt, despite the fact investment into Australia's agriculture sector remains comparatively low to other sectors, according to FIRB.

Singapore and Thailand's threshold remains at 50 million Australian dollars while the United States - Australia's largest direct foreign investor-, New Zealand and Chile will maintain their one billion Australian dollar threshold.

It's a strong message being sent when China and Australia are meant to be great friends after signing the China-Australia Free Trade Agreement.

It's this same agreement China gave unrivalled provisions for Australia's exports that these same local political leaders argued will help transition their economy from mining-led growth.

Australian analysts have told Xinhua Chinese investment into Australia's economy is a positive thing and should be encouraged.

Australia's Trade Minister Andrew Robb is openly trying to attract Chinese investment into Northern Australia to help spur growth, highlighting the commercial potential.

However, why should Chinese investment dollars that are wanted and needed in other parts of the world be subjected to an unfair, unequal playing field?

The main driver to the legislated and regulatory resistance are the xenophobic domestic political forces needed to appease conservatives following the ousting of former PM Tony Abbott in September's backroom party coup.

The sensitivity surrounding foreign investors in Australia's rural and farming communities, perhaps even antagonistic to certain countries, have local politicians attuned to keeping their constituents happy for the next election.

Maybe these constituents should know in 2014 the United States accounted for 163.4 billion Australian dollars worth of direct foreign investment into Australia, compared with China's 29.97 billion Australian dollars, according to the Australian Bureau of Statistics.

One of the only advantages Australia had post-GFC was its overwhelming abundance of hard commodities, however their transitioning from mining-led growth is likely to be much harder without foreign investment in agriculture and infrastructure.

Australia's largest trading partner, China, is transitioning to consumption-led growth and has high demand for the products Australia offers - if they can meet their potential - but Australia it's not the only country that can offer them.

Chinese businesses, like all businesses, don't expect special favors from governments, only a fair and equitable playing field. When the playing field isn't fair and more and more barriers are put up, like any business, they will reassess their priorities. Endit