Chinese SOE Investments Under the Australia-China International Investment Agreements: Wild Grass with Hidden Thorns

This chapter examines the regulatory challenges posed by Chinese SOE investments under the Australia-China International Investment Agreements (IIAs). Despite the extensive IIA framework between Australia and China, which includes agreements such as the Australia-China Bilateral Investment Treaty and the China-Australia Free Trade Agreement (ChAFTA), Chinese SOE investments present significant risks to Australia’s national interests, particularly following China’s latest round of SOE reforms. These reforms have enhanced the political influence of SOEs, increasing concerns over non-competitive investment practices. The chapter investigates the potential for Chinese SOEs to bring Investor-State Dispute Settlement (ISDS) claims against Australia, especially in the context of Australia’s tightened foreign investment framework. The analysis identifies specific risks under the current IIAs, focusing on possible breaches of expropriation and National Treatment obligations. The findings highlight that the existing IIAs may not provide sufficient safeguards for Australia to regulate Chinese SOE investments effectively. In response, the chapter recommends that future treaty negotiations, particularly the renegotiation of ChAFTA, incorporate stronger policy space protections. It suggests introducing SOE-specific rules to address non-competitive practices in future agreements (renegotiated ChAFTA), ensuring that Australia can protect its strategic interests while maintaining a fair investment environment.