Chinese port companies warn that Australian reviews increase sovereign risk

A Chinese company that owns a 1999 lease at Darwin Harbor warned that its treatment by the Australian government could scare investors from other countries.

Landbridge, a Shandong-based company founded by billionaire Ye Cheng, was informed last month of a security review of its Northern Territories business, which it acquired in 2015 for A $ 506 million (US $ 380 million). It was. Development follows a sharp deterioration in relations between Canberra and Beijing Collapse Investment by Chinese companies in Australia since 2016, when inflows peaked at A $ 16.5 billion.

“My problem as a foreign investor is that the government has approved us. We have experienced a great deal of pain. [review] For five years with the process, no one came up with a concrete idea of ​​what the problem was, “said Mike Hughes. Landbridge Australia The managing director told the Financial Times.

“We are a private company, not the Chinese government. If a review forced us to sell a port lease, it would certainly be a sovereign risk not only for Chinese investors but also for foreign investors looking at Australia. Will increase. ”

The controversy is fierce stalking debate Between Australian security and pro-business forces. The latter is worried that the decision to force Landbridge to sell the lease could threaten foreign investment.

Taka argues that it is dangerous for Chinese companies to manage critical infrastructure in the Asia-Pacific region.

A group of 15 right-wing lawmakers is also targeting the China Merchants Group, a state-owned company with a 50% stake in Newcastle, the world’s largest coal port. Last week, the group asked the government to scrutinize the port, arguing that the stake was “a geopolitical advantage over the Chinese Communist Party’s exports of Australian coal.”

With growing anger over China’s investment, the opposition Labor Party has criticized the conservative government’s treatment of Sino-Australia relations, claiming that it has fueled “nationalist sentiment” towards election interests.

“Federal talks about conflict and trade retaliation can be stopped and must be stopped,” Mark Magawan, the prime minister of the Labor Party-led state government in Western Australia, told business leaders last week.

May, Canberra Review Whether to abolish the controversial lease at Darwin Harbor near the US Marine Corps base in the far north, where Australia’s population is sparse. Following the decision of April that cancel Xi Jinping is the centerpiece of foreign policy of the President and Victoria the whole area straight initiative Agreement between Beijing.

“In my opinion, when the decision was made in 2015 [on the port lease] The situation was very different from 2021, “Australia’s Defense Minister Peter Dutton said in announcing the review.

The decision to lease the port of Darwin to Landbridge has raised concerns in Washington, but the Australian Strategic Policy Institute, a think tank, claims that Landbridge is associated with the PLA and the Communist Party. Landbridge states that it is a non-profit organization and this criticism is unfair.

Many analysts believe that the government will demand a change in lease.

“Canberra, for example, can subject leases to a security review every six months,” said Richard McGregor, an analyst at the Lowy Institute. “Alternatively, they could take the expensive and risky nuclear option of completely dismantling the lease.”

McGregor said Beijing would almost certainly retaliate, although Australia’s investment of similar nature in China was limited. Sanctions have already been imposed on various Australian exports.

“Retaliation is less important than how decisions bring new levels of sovereign risk to foreign investors in Australia,” McGregor said.

Chinese companies are becoming more cautious about trading in Australia due to increased scrutiny of trading and worsening bilateral relations. China’s investment fell 61% According to the Australian National University, it will reach A $ 1 billion in 2020, down from A $ 2.6 billion in the previous year.

Column chart of foreign direct investment (A $ 1 billion) showing China's investment in Australia

Landbridge’s Hughes said the forced sale risks putting pressure on Asian investment in Australia.

“Obviously, if you’re a US company, you won’t be too worried. But as you know, foreign investors from other countries have changed things over a decade or more. I know, “says Hughes.

Analysts are divided on whether dismantling the Darwin port lease will significantly change the sovereign risk environment for non-Chinese companies.

“In the case of Darwin Port, there are clearly special and unrelated factors involved,” said Jeffrey Wilson, Research Director at the Perth USA Asia Center.

Nonetheless, business leaders have cautioned Canberra to reset its ties with China, the country’s largest trading partner of A $ 251 billion in two-way trade in 2019-20. There is also concern that dismantling the port lease could cause fatal damage to bilateral relations and cause anxiety for foreign investors.

“There will be results beyond China,” said former Australian Trade Minister Andrew Rob, who oversaw negotiations on a free trade agreement between China and Australia agreed in 2015.

Rob, who was a paid adviser to Landbridge and other Chinese companies when he left the political office, said Canberra has the right to reassess port leases in the light of changing strategic conditions.

But he warned that business relations could continue as the political relations between Australia and China “turned into custard.”

“In some cases, some tones don’t take into account the sensitivity of the Chinese side,” Rob said. “There are certain things that have been created about China for thousands of years, such as saving the face.”

Chinese port companies warn that Australian reviews increase sovereign risk

Source link Chinese port companies warn that Australian reviews increase sovereign risk

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