by Alistair Nicholas
November 20th, 2014

Chinese investors expecting the free trade agreement (FTA) between their country and Australia to provide them with open access to the Australian market need to think again. The lifting of caps that limit Chinese investment levels, especially into sensitive areas like agriculture, will not mean free access to the market and may yet prove problematic for those investors they are intended to assist.

A clear sign Chinese investors need to be concerned was provided by Prime Minister Tony Abbott at the weekend. He has been on the hustings asking Australians to discard their mistrust of Chinese investment. In an interview with Sydney’s Radio 2GB, Abbott began adding caveats to assuage people’s concerns. He seemed to be saying the public should relax because the deal “won’t actually come into force” immediately and because “almost certainly legislation for some aspects of it will have to be passed” by the nation’s Parliament. In other words, Australians can relax as the deal won’t be enforced immediately and may not be enforced in full if Parliament takes issue with specific aspects of it.

Australia held the line against Chinese requests that would have provided free access to Chinese state-owned enterprises (SOE’s) to invest in Australia without first obtaining approval from the Foreign Investment Review Board (FIRB). This has been taken off the table for three years. The agreement reached will require FIRB approval for all investments in agricultural land and will impose a $53 million threshold for agribusiness investments.

Although that will appeal to Chinese investors it will not make it easier to invest in Australia. In a sense it means they will have their work cut out for them.

recent poll by The Lowy Institute, a think tank that focus on international relations and geopolitics, found that nearly 50 per cent of Australians fear that China will become a military threat to Australia in the next 20 years. And nearly 60 per cent felt Australia is allowing too much investment from China. (Less than five per cent of respondents felt Australia was not allowing enough investment from China.)

This means Chinese individuals and corporations looking to make sizeable investments into agriculture and agribusiness will need to approach the market strategically and sensitively. They will need to appoint senior Australians to their boards, invest in corporate social responsibility programmes, engage local communities, particularly indigenous communities, and maintain constant communications with the Australian public to assuage ongoing concerns about the specific investments and ensure Australians that Chinese investment is generally beneficial.

The road for Chinese investment into Australia may have been straightened slightly but it may also make for a bumpier ride. With the threshold for FIRB oversight raised the public will take a greater interest in where Chinese investment is going and the impact it might be having on Australian business and society. The bumps in the road won’t be any easier to avoid because the road is straighter. Indeed, hitting a bump in the road at a higher speed can do a lot more damage. Chinese investors might want to also invest in smoothing the road surface ahead.

Weber Shandwick’s full brief on the free trade agreement can be found on the Australia China Business Council website.

Alistair Nicholas is a Senior Advisor in Weber Shandwick Australia’s Government Relations, Public Affairs and Crisis Management Practice

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