Tony Abbott in China to Boost Australian Economy

abbottAustralian Prime Minister Tony Abbott’s trip to Asia has so far been a rousing success, or so his supporters would have everyone think. The reality of two agree trade deals in two days is hard to overlook, but not everyone is so positive about the changes that are ahead for Australian business. Some industries are already complaining that the benefits the Australian government has touted will not actually help them that much. Others are skeptical of foreign investment, which will be a major topic for the prime minister in China. Such skepticism is natural to the process, but Tony Abbott is firm on one point: he is in China to create a boost for the Australian economy and he is going to do that any way he can.

One of the most important things he wants to do is change how Australia controls who invests within its borders. There is currently a 2.44 million dollar threshold on how much a company can invest in Australia before it is subject to a state review by the Foreign Investment Review Board (FIRB). Changing the threshold to a possible one billion dollar mark would make it easier for Chinese companies to invest in Australia, but most importantly it would make it easier for those companies owned by the Chinese state. At this time, there is a largely inflexible veto power over state-owned companies investing in Australia and the prime minister is looking to see how that situation can be somewhat mollified. This would go a long way to improving business relations with China, which has been most affected by that policy.

Throughout his trip, Abbott has been pushing his message that Australia is “open for business” to foreign investors. The deals he made with Japan and South Korea were two important steps for that message, but there are fears that could complicate negotiations with China, which in many ways, both militarily and economic, is a competitor with both of those countries. So far, however, all signs from the Chinese have been good. Officials are supposed to have said that Abbott’s visit is welcomed by a leadership hoping to expand the country’s economy, which is based largely in exports. That lines up well with the prime minister’s desire to get more foreign investment into the country he helps govern.

There are only two problems with Abbott’s policy on getting more foreign investment from China in order to boost the Australian economy. First of all, foreign investors from other countries have expressed worry about the close relationship between Australia and China. Undoubtedly, due to politics and geography, the two countries are closely linked, but making those ties stronger could put off investors from European countries and America.

The United States has its own issues with China, especially over China’s use of military and maritime force and the unilateral decision to impose the air defense identification zone in the East China Sea. U.S. Admiral Harry Harris was at the Australian War Memorial on Wednesday and characterized China’s actions in a negative light, calling them a “witches brew.” This could potentially be an issue for Tony Abbott in the future, since Australia has maintained close ties with the United States for a number of years. He will no doubt want to avoid any problems with these two opposing allies.

The other issue with Abbott’s more open policy on Chinese investment is that it is a relatively recent position for him. When he was the opposition leader in 2012, he stated that it would “rarely” be in Australia’s interest to allow foreign states or their agents to own businesses in Australia. This policy was characterized by then Trade Minister Craig Emerson as effectively keeping all foreign investment out of Australia. In the present, however, Tony Abbott seems to be gung-ho for all foreign investment, including that from China. His policy flip-flop will most likely not go unnoticed in Australian politics, though it will probably be of little consequence to his foreign policy in action this week.

The prime minister is walking a careful line on this trip, both for his foreign policy and for his political situation at home. Moving closer with China might be good for the economy, but it could affect Australia’s partnerships with other allies, such as the United States. Moreover, his complete flip-flop on foreign investment could be a political weapon for his opponents in local politics, who are looking for ways to fight back against the ruling party and undermine the prime minister’s hold on the country. Tony Abbott’s policy of having Australia “open for business” is meant to boost the country’s economy, and it just might do that, though the forecasts will have to wait until events in China are finalized to be made with any certainty.

Opinion by Lydia Webb

Sources:
Sydney Morning Herald
The Diplomat 
The Australian
Financial Review
Sydney Morning Herald
The Australian
Financial Review

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