Understanding the impact of Chinese investment

Investment in Australian companies by Chinese state-owned enterprises (SOE) is growing rapidly, bringing both opportunities and challenges.

Dr Ping Xiong and Professor Roman Tomasic are examining developments in both China and Australia from a legal perspective, to see what this might mean for the way such investments are regulated in the future.

It is a complex area, made more so because the SOE sector in China is being transformed by domestic reform efforts. This is affecting the way they operate and their place in the broader economic and political system.

Dr Xiong, a Senior Lecturer in the School of Law, says it is important to understand the nature of these changes and how they might affect the way Chinese SOEs wish to behave as owners of, or investors in, Australian companies. “Australian legal and regulatory frameworks need to be sensitive to this,” she said.

The current research is underpinned by a belief that while there is no reason to block inbound investment by Chinese SOEs, it is also appropriate to apply some form of regulation to their activities.

“SOEs from any country should not be confused with privately-owned companies seeking to invest in Australia,” Dr Xiong said. “Foreign SOEs are more akin to sovereign wealth funds than foreign multinational companies and their investments in Australia cannot simply be left to the market to deal with. There needs to be an informed conversation.”

Dr Xiong has previously carried out detailed research on Chinese trade secrets law and protection. Prof Tomasic has undertaken a detailed study of the corporate governance of Chinese companies in China.

Dr Xiong said that even with the reform process the Communist Party would continue to play an important role in the internal governance and control of China’s SOEs. “This is especially relevant in Australia given the disproportionate scale of Chinese SOE investment here compared with SOE investments in much larger countries such as the US,” she said.

Recent studies show that SOEs account for 80% of all Chinese foreign investment in Australia by volume and 94% by value.