New foreign investment rules not aimed at China

Claims that yesterday's changes to Australia's foreign investment rules target Chinese direct investment into Australia are absurd.

The Australian Government’s decision to make temporary changes to foreign investment rules was in response to the impact of the coronavirus crisis on the country's financial markets. The changes were made in order to protect Australian businesses from foreign takeovers at a time when they might be especially vulnerable.

The changes were announced by Treasurer Josh Frydenberg yesterday. They reduce the threshold for foreign investment approval to $0.00 - zero dollars. This means all foreign investments during the Covid19 crisis will require approval by the Foreign Investment Review Board (FIRB) and ultimately by Treasurer Frydenberg, regardless of the size of their investments. Previously a range of thresholds from zero to to $1.192 billion applied to different countries and state-owned enterprises, and sectors.

Yesterday's changes also extend the time for the FIRB to consider foreign investment applications from 30 days to six months.

The Treasurer said, “these measures are necessary to safeguard the national interest as the coronavirus outbreak puts intense pressure on the Australian economy and Australian businesses.”

Reporting the news or editorialising?

Despite the changes applying to all foreign investment projects regardless of the country of the would be investor, Fairfax Media could not restrain itself from claiming the changes were targeted at China and due to The Sydney Morning Herald/The Age “exposes” of the past week that two Chinese companies (property developers Greenland and Risland) allegedly had their staff purchase much needed medical equipment in the fight against the coronavirus for shipment back to China. The stories claimed the actions of the companies “contributed” to current shortages of much needed protective medical supplies such as face masks and disinfectant in Australia. (Both Greenland and Risland have responded in media statements on their websites to the Fairfax Media stories – they can be read here and here.)

Today’s Australian Financial Review reported the foreign investment rule changes under the headline “China Spree Sparks FIRB Crackdown.” It’s opening paragraph claimed:

“The federal government has placed severe, immediate and indefinite restrictions on all foreign investment bids following at least two cases of Chinese-owned companies in Australia securing tonnes of precious medical supplies and shipping them back to China.”

The Sydney Morning Herald and The Age were more guarded in their reporting of the changes. They recognised recent financial market volatility in the lead to their stories, but ultimately couldn’t help claiming the changes for themselves:

“While the new rules apply to all overseas buyers, they come after The Sydney Morning Herald and The Age revealed Chinese companies had snapped up medical supplies in recent weeks for shipment to their home country.”

Facts, damned facts and journalism

The simple fact of the story is that there was nothing in the Treasurer’s announcement or subsequent comments by him to give any credibility to the claims by Fairfax media that their revelations drove the temporary changes to the foreign investment rules.

Questioned by the ABC this morning on the changes, the Treasurer reiterated that they applied to all foreign investors and not to investors from any single country. Pushed on whether the two Chinese companies involved in purchasing and shipping medical supplies to China had acted morally, the Treasurer said it was not his role to pass moral judgment on the actions of specific companies.

Indeed, the Treasurer’s role is to apply the law, and on occasion to review and change it if necessary. That’s what the Treasurer has done. He has stated clearly that the changes apply to all foreign investment and have been made in the national interest. The changes are simply not a kneejerk reaction to stories in the Fairfax Media.

Fairfax media needs to get back to reporting the news, pure and simple. And perhaps to exercising some restraint and modesty in doing so.

Chinese companies need to consider social licence to operate in Australia

My criticism of Fairfax’s approach to journalism should not be construed as a defence of the two Chinese companies involved in the purchasing and shipping of medical supplies to China. While I recognise that they did so before the coronavirus situation in Australia reached the current emergency stage, the fact is their actions will not endear them to the Australian public. They have placed their “social licence” to operate in Australia in jeopardy.

Although their actions may have been done altruistically to help the “motherland” which was itself in a dire situation in January and February of this year, companies operating in foreign markets need to find ways to win and keep a social licence to operate in those markets. This is especially important for Chinese companies operating in Australia, particularly at a time when there is considerable suspicion about the intentions of the government of the People’s Republic of China.

If Greenland and Risland wish to retain their social licence to operate in Australia they need to do more than issue clarifying media statements that do not get reported. They should work to quickly source (from China or elsewhere) much needed medical supplies for the fight against the coronavirus in Australia. And they need to donate those supplies to Australian organisations that are in the midst of the fight against Covid19.

Of course, if Greenland or Risland were to do so, it will be interesting to see how Fairfax Media reports their altruism.