(Bloomberg) — Australia will implement a tough new screening regime on foreign investors seeking to buy sensitive assets, as it bids to bolster national security amid a diplomatic row with China.
Telecommunications, energy, technology and defense-manufacturing companies will be included in the zero-dollar threshold for screening. The changes, intended to be legislated this year and enforced from Jan. 1, will include a new national security test and give the treasurer last-resort powers to force asset sales.
The changes could have implications on Australia’s relationship with its largest trading partner China, which have soured this year after Prime Minister Scott Morrison led calls for an independent probe on the origins of the coronavirus in Wuhan.
Beijing responded with verbal attacks on the conservative government, saying it was doing the bidding of key ally the U.S., while new tariffs on Australian barley and a ban on beef from four meatworks have raised fears in Canberra that the Chinese government is using “economic coercion” in retaliation.
Asked by a reporter in Canberra on Friday whether the changes will create new tensions with China, Morrison said: “I don’t believe why it should. Countries make decisions on their own interests for their own rules and we respect the rules and interests of other countries.”
Wider Concerns
Australia isn’t alone in ramping up its foreign investment screening — in recent years, economies including the U.S., Japan and the European Union have toughened their own laws to protect national security. The new announcement comes a day after Morrison signed a crucial defense agreement with Indian Prime Minister Narendra Modi and upgraded ties to a Comprehensive Strategic Partnership, as both nations navigate fraught relations with China.
“We have to be on our guard against China purchasing critical infrastructure and investing in our vital industries, so it makes sense for the government to extend and deepen its oversight of foreign investment,” said Malcolm Davis, a senior analyst at the Australian Strategic Policy Institute in Canberra. “China will probably take umbrage but it needs to understand that Australia makes these decisions in its own interests.”
The U.S. remains Australia’s largest source of approved investment from overseas, comprising A$58.2 billion ($40.4 billion) — or 25% of the total — in the year ending June 2019. China comprised 5.7% of the total, valued at A$13.1 billion.
Under Australia’s current rules, state-owned enterprises already have zero-dollar screening threshold while most private investments under A$275 million, often for large land holdings, are waved through. The monetary thresholds have meant some investments that have raised national-security concerns have escaped screening.
Chinese purchases of agricultural land, including iconic properties such as the Cubbie Station in Queensland and the Van Diemen’s Land dairy in Tasmania, have proved particularly contentious in Australia.
Call in Powers
“The reforms will ensure that our foreign investment regime is able to respond to emerging risks and global developments,” Treasurer Josh Frydenberg said, labeling the changes the most significant in the area since 1975. The government will spend an additional A$54 million to bolster compliance and monitoring, he said.
After the changes, the treasurer will have power to “call in” an investment before, during or after an acquisition for review if it raises national security risks and has not captured by the “sensitive national security businesses” definition.
“Technology has been evolving and our geopolitical climate has become more complex,” Frydenberg told reporters on Friday. “In fact, the world over, governments are seeing foreign investment being used for strategic objectives, not purely commercial ones.”
While the treasurer will have the power order disposal of approved foreign investments where national security risks emerge post-approval, the last-resort power will not be retrospective.
As treasurer in 2016, Morrison ordered the Foreign Investment Review Board to step up scrutiny of foreign investment in state-owned infrastructure after a strategic port in Darwin used by the U.S. military was leased to a Chinese company. The prime minister on Friday ruled out the possibility of that sale, which at the time escaped the regulator’s scrutiny as it was managed by the Northern Territory government, being revoked.
Protecting Assets
Sandy Mak, partner and head of corporate at Corrs Chambers Westgarth, said she looked forward to seeing whether details in the draft legislation due for release next month would make a fundamental difference to existing rules, and which sectors would be classified.
“The government’s objective here is protect sensitive assets and you’d hope when the legislation comes out it will achieves that without stymieing investment in the types of sectors and businesses that need it most,” Mak said. “Anything oil and gas related for energy independence, anything telecommunications related, and anything defense related is definitely going to be top of their list,” she said, while data-related investments may also be targeted.
Before Australia’s calls for a probe into the origins of the coronavirus, its diplomatic ties with Beijing were already under stress. The government cited Beijing’s “meddling” into national affairs as a catalyst for its anti-foreign interference laws passed in 2018, the same year it banned Huawei Technologies Ltd. from helping build its 5G network.
FIRB Chairman David Irvine welcomed the new screening package, saying it “appropriately addresses increasing risks to the national interest whilst ensuring Australia remains welcoming and open to foreign investment.”
(Updates with Morrison comment on China in 5th paragraph.)
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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
