Protectionism, national interest, and strategic distrust : the Labour government’s attitude and approach towards Chinese investment in Australia (2007-2013)

Australia’s Rudd-Gillard-Rudd Labor Governments (3 December 2007 – 18 September 2013) witnessed China overtaking Japan to become Australia’s largest trading partner. More importantly, it found itself having to deal with a sudden and dramatic surge of Chinese foreign direct investments (FDI) in Australia, most notably in the resources sector by state-owned enterprises (SOE). This had never been an issue with preceding administration. Expert recommendations on the government’s appropriate response to this emerging economic dependence on a strategic non-partner are rather conflicting. Views ranged widely; some urged the government to take “a more protectionist approach in order to protect the national interests of the country”, while others criticised the “restrictiveness of Australia’s foreign investment regime” (Senate, 2009). This research intends to explore the following questions: what approach did the Labor government take towards Chinese investment? In other words, was it a protectionist approach? How did the administration balance the country’s urgent demand for foreign capital to sustain its mining boom (and in turn economic growth) and domestic concerns over foreign ownership of resources by a strategic rival and other national interests that have or have not been made explicit in review decisions by the Foreign Investment Review Board (FIRB)? The focus of this research is to evaluate the Labor government’s attitude and approach by examining government policy updates and clarifications, which are widely regarded as targeting Chinese investors, and FIRB review decisions on investment proposals from Chinese companies. An analysis will be made not only on the formation of the policies, namely their background, content and objectives, but also on how they were implemented in individual FIRB reviews and what outcome or effect they had on China’s investment in Australia. This study will contribute to research on Labor’s China policy in the economic domain. Notably, there is still a dearth of literature analysing government policy towards China on investment for the period specified. Such discussion will be illuminating for future Australian governments, for whom investment will continue to be an issue of significance in its relations with China. An analysis of Labor’s policy, as a case study, against the framework of protectionism/liberalism will also add to our understanding of what is a neglected area of FDI research