(ATF) The Australian government has blocked a $230 million takeover offer by a Chinese state-owned company for a local building contractor, the target’s South African parent announced, in a move likely to cool relations between Canberra and Beijing.
The refusal to allow the acquisition is the first since tough new Australian foreign investment rules came into force on January 1.
China State Construction Engineering Company tried to buy Probuild from Johannesburg-listed Wilson Bayly Holmes Ovcon (WBHO) for A$300 million, but the transaction was rejected on “national security” grounds.
“WBHO has been advised by the potential acquirer of Probuild that it has withdrawn its proposed investment application in Probuild lodged with the Australian Foreign Investment Review Board following advice that its application would be rejected,” the South African company advised the Johannesburg Stock Exchange.
The new regulations mean that Canberra can review proposed investments in sensitive sectors by foreign bidders, scrutinise compliance with approval conditions set by government, and order divestments.
A recent report by the University of Sydney and KPMG found Chinese companies invested $2.6 billion in Australia during 2019, down 58% from a year earlier, confirming speculation that investment has fallen dramatically since bilateral relations soured over the past year.
The causes of the friction include Canberra’s decision to bar Chinese telecommunications giant Huawei from providing 5G equipment, its introduction of foreign political interference legislation after a series of influence-peddling cases, and calls for an inquiry into the origins of the Covid-19 outbreak in Wuhan.
For its part, China has progressively banned or restricted Australian imports, from coal and cotton to rock lobster. Beijing also halted some imports of timber and banned barley shipments, as well as launching an anti-dumping investigation into Australian wine.