Commentary | 21 September 2018

Blocking CKI from buying Australian pipelines would be a win for Beijing

Originally published in Australian Financial Review on 21 September 2018

Originally published in Australian Financial Review on 21 September 2018

If Australia is going to more closely scrutinise Chinese investment, something it has every right to do, then it probably helps to define what exactly “Chinese” means.

A good place to start is the takeover that will soon land on the Treasurer’s desk – the listed $13 billion Cheung Kong Infrastructure (CKI) bid for the APA Group, which owns and operates gas pipelines in Australia.

The bid must get over a number of hurdles that any such takeover has to surmount – on competition grounds, which it has already passed, and the guidelines governing foreign ownership of critical infrastructure.

But it’s the new, unwritten rule for foreign investment – that anything “Chinese” should get extra scrutiny on national security grounds – that is generating most heat in the lead-up to a decision.

In an area littered with racial landmines, the word “Chinese” is already applied with loose abandon to Australian citizens of Chinese descent.

By the time their exploits are written up in much of the media, their citizenship disappears, and they are simply tagged as “Chinese”, as though their ethnicity is the mark of Cain.

Listen to Sydney shock jock Alan Jones, and his ilk. CKI is getting the same treatment, described as “Chinese” in a way in which the description seems, without need of explanation, to carry dark and pejorative meaning.

CKI is part of the empire founded by Li Ka-shing, one of Hong Kong’s legendary tycoons whose global interests span everything from property to telecommunications to ports and infrastructure.

It is not a “Chinese” company in the way that Canberra’s securocrats would ordinarily judge a Chinese company to be.

In other words, it is not a state-owned company in which senior executives are appointed, overseen and, if need be, removed and arrested for wrongdoing by the ruling communist party.

Nor is it like big Chinese private companies, which these days are forced to have a party presence in their executive ranks as well.

Indeed, CKI is not even a Chinese company in terms of its investments. Despite being on the doorstep of the biggest growth story in the world for decades, Li’s empire has increasingly looked elsewhere to put its money.

The holding company for the conglomerate is one of Asia’s most outwardly-focused enterprises, with investments in more than 50 countries. CKI itself has just 1 per cent of its assets in China.

Li, and his son Victor, who formally took over from his father this year, have long understood the risks in China and decided that their capital would be more reliably deployed elsewhere.

In a column in The Australian, and in an appearance on Sky News, Jim Molan, the Liberal Party senator leading the charge on the backbench against the deal, shifted between acknowledging that CKI was a Hong Kong company, and calling it “Chinese”, in railing against the deal.

As Molan wrote: “Allowing the Chinese to own APA would not only assist Beijing’s intelligence-gathering, it increases our vulnerability to sabotage ... by deploying malware into these ­industrial control systems.”

Leaving aside the plethora of laws allowing the government to take control of pipelines in any emergency, Molan should know you don’t need to own an asset, or even have physical access to it, to cripple its operations with a cyber attack.

It is true that China has been putting the squeeze on Hong Kong politics, in an attempt to eradicate its pro-democracy critics in the former colony.

Like Hong Kong’s other pragmatic tycoons, the Li family have toed Beijing’s party line on politics and left Beijing’s critics to their fate.

China continues to be its own worst enemy in this respect, and their actual worst enemies are more than willing to use their crushing of the territory’s democrats against Beijing for all its worth.

But this is not a narrative that Australia needs to buy into.

The next step on this slippery slope would to assume that any company headed by members of the so-called overseas communities in, say, Singapore or Malaysia, are also destined to fall under the sway of Beijing.

In the longer term, the result would be less foreign investment in Australia, and a severing of commercial ties to the region at a time when Australia needs to build and deepen our enmeshment in Asia.

Australia is rightly keen to ensure Hong Kong keeps as much of its identity and autonomy as possible. Branding CKI as effectively just another arm of the Chinese party-state would be a sure sign that we are giving the game away.

In that respect, blocking CKI on national security grounds from buying Australian pipelines would be a win for Beijing.