Fears that foreign buyers may swoop on distressed Australian assets are more to do with optics than any imminent threats
30 March 2020 | Marcus Reubenstein
In response to COVID-19 generated pressures on the Australian economy, the government has moved to temporarily eliminate limits on foreign investments that require FIRB (Foreign Investment Review Board) approval.
The announcement by Treasurer Josh Frydenberg, stipulates, “Effective from this date of announcement (29 March 2020), all proposed foreign investments into Australia subject to the Foreign Acquisitions and Takeovers Act 1975 (the Act) will require approval, regardless of value or the nature of the foreign investor.
He says, “These measures are necessary to safeguard the national interest as the coronavirus outbreak puts intense pressure on the Australian economy and Australian businesses.”
The change in government policy is a temporary measure which will remain in place for the duration of the COVID-19 crisis.
Not singling out any nation?
Australian media speculation is this policy change has been directed squarely at China, Murdoch publications calling this a “Great Wall of China” policy to block takeovers.
Canberra bureau chief of the Australian Financial Review, Phillip Coorey reports the government was pushed to this decision by reports of two Chinese-owned property developers sending locally sourced medical supplies to Wuhan in February, some weeks before it became apparent that Australia was about to face a COVID-19 crisis of its own.
Despite this relief effort having been supported by a number of Australian companies as well as the Australian Medical Association – and the fact this relief effort had no foreign investment implications – there is apparently concern that Chinese companies may be targeting distressed Australian businesses.
The reality is that the most distressed businesses in Australia right now are airlines (which will receive government bailouts), small businesses, retailers, hospitality and tourism, these are hardly attractive assets to foreign traders.
The treasurer’s public stance is that China is not the target, “Well these measures are not directed at one particular country, they’re all about supporting the national interest, that’s what foreign investment must be in, the national interest,” Frydenberg says.
China not necessarily cashed up
Though China is likely to emerge from the COVID-19 crisis ahead of a number of other economies, it will not do so unscathed. The World Bank and International Monetary Fund have slashed GDP projections for China.
An even more bearish outlook has come from Nomura Securities’ chief China economist Ting Lu who is forecasting China’s first quarter GDP growth will drop by 9% compared to Q1 2019.
Chief Strategist at CMC Markets, Michael McCarthy says the move is not so much to ward off imminent threats but to lay the groundwork for a situation which might arise in six months time.
“Australia is a relatively small economy; it’s not just China, we could be very attractive to investors from Europe, Japan and the United States but the dust has yet to settle so I wouldn’t expect to see any moves in the short-term.”
Michael McCarthy, CMC Markets
“China has very big sovereign wealth fund but these zero FIRB limits don’t really change much because it is substantial investments that are likely to raise concerns and they are already subject to FIRB approvals.”
“It’s a policy change that shows the government is being proactive in the midst of a crisis, the optics are good for the government.”
China well down on the list of foreign investors
Tabloid media, vocal anti-Chinese government backbench members, Andrew Hastie and Tim Wilson and One Nation leader Pauline Hanson have been vocal in their recent calls to restrict Chinese investment. However, the numbers don’t support their argument of an imminent threat.
Since 2017 Chinese investment has dropped by more than 25 percent and China is only the ninth largest foreign investor, with a measly 1.8 percent of total foreign funds in Australia.
Top ten foreign investors in Australia
- United States (26.7%)
- United Kingdom (16.4%)
- Belgium (9%)
- Japan (6.5%)
- Hong Kong (3.45%)
- Singapore (2.4%)
- Netherlands (2.3%)
- Luxembourg (2.2%)
- China (1.8%)
- France (1.4%)
In terms of investments needing FIRB approval, in the five major non-real estate sectors China only makes the top three list of FIRB approved investments in two categories. Though a major investor in real estate FIRB does not publish country of origin statistics on real estate investments.

Given China is the world’s second largest economy, and far and away Australia’s biggest trading partner, the scale of its investments in Australia is not at a level that should be ringing alarm bells.
According to independent economist Clifford Bennett, “It is important to find a balance between reasonable foreign investment and parties taking advantage of a momentary collapsed currency and a domestic economy weakened by coronavirus. Legitimate foreign investment should remain relatively unhindered.”