A ‘Great Wall’ with Cracks: The Implications of China’s SOE Reforms for Australia’s Foreign Investment Framework

This chapter explores the intersection of China’s latest round of SOE reforms and Australia’s foreign investment framework. With China emerging as a leading investor globally, Chinese SOEs play a pivotal role in its outward foreign investment, particularly in Australia’s critical sectors such as resources and infrastructure. The research investigates how the tightening of Australia’s foreign investment regulations, especially the 2021 reforms, responds to the evolving structure of Chinese SOEs, which have become increasingly entangled with State policy under recent reforms. The chapter addresses the core question of whether Australia’s strengthened foreign investment framework, designed to safeguard national interests, is sufficient to mitigate the risks posed by Chinese SOEs, particularly given their closer ties to the Chinese government. It argues that despite these regulatory changes, Australia’s framework remains ill-equipped to fully address the emerging risks associated with these investments. The findings are significant for understanding the broader implications of foreign investment policy in the context of China’s evolving SOE structure. The chapter proposes specific factors that Australia should consider when screening investments from Chinese SOEs, such as the impact of inter-SOE alliances and the political nature of these entities, contributing to a more nuanced approach to foreign investment.