China's Latest Round of SOE Reforms and its Implications for Chinese SOE Investment: The Case of Australia

Abstract

Over the past few decades, the world has witnessed the global proliferation of Chinese foreign direct investment (FDI) made by State-owned enterprises (SOEs). which has raised concerns among host States in the context of the last decade’s escalating geopolitical tensions. The concerns stem mainly from the presumed ties of Chinese SOEs with the Chinese government and the Chinese Communist Party (CCP). The concern has contributed to the trend towards increased legal barriers to Chinese SOEs’ ability to invest in developed countries.

China’s attempts to reform SOE have been ongoing since 1978. In 2012, the Xi Jinping administration launched the fourth round of SOE reforms, which is unprecedented in its complexity and duration. This thesis provides an in-depth investigation of the implications of China’s latest round of SOE reforms on the political ties of Chinese SOEs and their FDI in developed countries. This research finds that the reforms have significantly enhanced SOEs’ connections with the government and the CCP and identifies the mechanisms by which the Chinese government and the CCP exert influence over SOE FDI activities.

This research then takes Australia as an example, examining the effectiveness of Australia’s domestic foreign investment framework and the current international investment agreements between Australia and China in regulating Chinese SOE investments. It concludes that Australia’s current legal regimes do not adequately address the potential adverse effects of Chinese SOE investments on Australian interests. This thesis provides recommendations on legal measures for Australia to better manage the potential risks associated with Chinese SOE FDI in Australia. This research seeks to contribute to the maintenance and improvement of China’s international investment relationships with developed countries, primarily through its SOEs.