The trade impasse comes as Australia moves to counter Chinese sanctions by withdrawing a $300m takeover of a Chinese construction contractor. Australia cited national security concerns as a key reason for the deal’s failure, and the statement stressed that the bid had been withdrawn before it was formally rejected. Australian Treasurer Josh Frydenberg told Reuters the government doesn’t comment on the suitability of foreign investment screening arrangements or how they apply to particular cases.
China’s state-owned China State Construction Corporation (CSCEC) is bidding for Probuild, one of Australia’s biggest builders, which is 88% owned by Wilson Bayly Holmes-Ovcon(WBHO), a South African firm. ProBuild said in a statement that China Construction’s bid failed, with Australia citing national security concerns as a key reason for the deal’s failure, and that the bid was withdrawn before it was formally rejected.
“After Australia’s Foreign Investment Review Board advised the company that its investment application was likely to be rejected by the Australian Federal Government on national security grounds, WBHO decided to withdraw China Construction Corporation’s investment application,” the statement said. WBHO remains optimistic about the underlying development of Probuild and its prospects in the Australian market and continues to evaluate all potential opportunities for Probuild to maximize shareholder value as well as the true strength of Probuild.”
As first reported by the Australia Financial Review, Australia is concerned about China Construction’s links to China’s defence industry. Mr. Frydenberg, for his part, wrote in an email: “The Australian government does not comment on the applicability of foreign investment screening arrangements or circumstances that may apply to particular cases.” It’s the latest development in deteriorating relations between Beijing and Canberra, with China earlier suspend imports of Australian timber from the states of New South Wales and Western Australia after local customs officials said they found harmful organisms in shipments. China has also imposed a series of trade measures on Australian products ranging from barley to beef.
Significantly, Mr Frydenberg had previously indicated that he would reject the deal because of its implications for national security and national interests. “When it comes to China-Australia trade tensions, they are visible, they are real, they are visible to everyone and they are serious,” he said earlier. Australia supplies more than 60 per cent of China’s iron ore, which is critical not only for steel production, not only for domestic use, but also for exports.”
He added: “So they are dependent on our iron ore and I don’t know what their next move will be on trade issues, but what I do know is that Australia will continue to defend its national interest and would like to see the Australia-China trade relationship continue. We are also exploring new markets for our products and providing support to our exporters to diversify. The Canberra government also factored in tensions over trade with China in its earlier announced economic forecasts.”
Birmingham, a former Australian treasurer, said the global outlook remained challenging as the Covid-19 outbreak and restrictions continued, and trade tensions affected Australia’s exports. On November 28 last year, Beijing imposed duties of more than 200 per cent on Australian wine imports after an anti-dumping investigation. China has also imposed tariffs on barley imports from Australia, which is taking the China case to the World Trade Organisation stage in a standoff that is expected to take years to resolve.
The latest data from the Australian Bureau of Statistics showed the trade surplus narrowed by 24.2 percent to A $5bn from A $6.6bn in October. China’s restrictions on coal and agricultural products have weakened exports. But a rebound in Australia’s domestic economy has attracted record imports. Australia’s total imports rose 10 percent in November, led by telecommunications, autos, and aircraft imports, the data showed. Australia’s overall exports rose 3 percent year on year in November, led by a surge in gold exports. But exports of goods to China fell nearly 10 percent to a four-month low.