As a middle power in a strategic location, Australia faces an increasingly vexed geopolitical environment. A long term ally of the United States, Australia has to date managed to assiduously build commercial links with China without compromising relationships. However, over recent months the Turnbull Government has expressed concerns over perceived Chinese attempts to influence Australian decision making. Australia has also become more vocal on contentious foreign policy topics such as the South China Sea. Foreign policy observers note a general cooling in Australia’s bilateral relationship with China over recent months. Amid tighter supervision of all outbound investment by Chinese regulators, there is worry that Chinese investment in Australia will suffer due to these new complications.
Statecraft takes a contrarian view based on our on-the-ground knowledge of actual deal flow. While some sectors in Australia may be negatively impacted by these frictions, Chinese interest in assets in strategically important sectors such as resources, energy and financial services remains robust. Recent media coverage in Australia indicates a wide range of potential transactions, including China Life’s possible acquisition of A$3billion worth of life insurance assets from AMP, Yancoal’s possible acquisition of A$2 billion of Queensland resources assets from Rio Tinto, strong Chinese interest in listed dairy company Murray Goulburn (ASX: MGC) and China Energy’s failed A$430 million bid for Australian listed oil and gas exploration company AWE Limited (ASX: AWE). Market feedback provided to Statecraft reinforces that there is little evidence of a slowdown in the early stage scoping activities being undertaken in Australia by prospective Chinese acquirers. Complexities associated with cross border transactions ensure that robust advice and support can be a critical success factor in growth markets such as Australia.
Statecraft has specific expertise in Chinese cross-border transactions. Please contact director CT Johnson on +61 2 8080 0060 or ct.johnson@statecraft.com.au for a confidential discussion. A Mandarin speaker, CT has more than a decade’s experience in China research, events and commercial matchmaking.
