Between Growth and National Security in Host Countries: FDI Regulation and Chinese Outward Investments in Australia’s Critical Infrastructure

Natalia Ribberink,Irina Heim

doi:10.46697/001c.19506

Abstract

To achieve sustainable growth, China facilitates outward foreign direct investments (FDI) in natural resources and technology through large supportive policies and massive financing, particularly through the expansion of its state-owned companies into foreign markets. This trend has accelerated economic growth in Australia but has also raised national security concerns regarding foreign investments. This paper discusses the problem of balancing foreign investment and national security and aims to stimulate discussion on the extent of regulations necessary for FDI in critical infrastructure. This paper will be interesting for host-country policymakers balancing inward FDI and national security concerns through appropriate screening mechanisms.

Highlights

There are growing concerns related to geopolitical interests behind Chinese FDI1 in Australia and other countries, Chinese foreign direct investment (FDI) flows into Australia have been falling precipitously from their peak in 2015–2016
We offer some recommendations to policymakers responsible for balancing inward FDI and national security concerns through appropriate screening mechanisms:
Chinese investment projects encompass investments in critical infrastructure, which have often been a subject of concern in Australia and many other countries

Summary

INTRODUCTION

There are growing concerns related to geopolitical interests behind Chinese FDI1 in Australia and other countries, Chinese FDI flows into Australia have been falling precipitously from their peak in 2015–2016. This decline can be attributed to some regulatory/legislative measures discussed in this paper, changes in China’s internal domestic investment policy including scrutiny of outbound investment and stricter capital controls, and more generally, to the deterioration of the economic relationship between two countries. The pandemic transformed international business, global value chains, the role of governments in regulating foreign direct investment (FDI), the response of policymakers to the challenges such as missing national production facilities for critically important goods and services (medical ventilators, face masks, vaccines, medical, and technological capacities). Between Growth and National Security in Host Countries: FDI Regulation and Chinese Outward Investments in Australia's

United Kingdom

AUSTRALIAN EXPERIENCE

POLICY RECOMMENDATIONS

Findings

CONCLUSION