August 14, 2023
The Albanese government is weighing whether it will clamp down on Australian investment in sensitive technology ventures in China after President Joe Biden announced a ban on US firms doing so to preserve America’s national security edge.
The Australian Financial Review can reveal the White House has broached the ban with Australia, as security hawks urged the Albanese government to impose similar controls on local firms and as businesses watch the new restrictions closely.
Although the US has not requested that Australia adopt parallel measures, American officials have said they have spoken widely with other allies and partners, and indicated that other nations were likely to follow through with similar curbs.
The timing of the US ban comes at a sensitive stage in Canberra’s efforts to stabilise relations with its biggest trading partner after China backed down on punitive barley tariffs and Anthony Albanese plans a visit to Beijing.
“The US government has engaged partners, including Australia, on their potential implementation of an outbound investment screening regime,” the Department of Foreign Affairs and Trade said in a statement.
“Australia is assessing the implications of the Biden administration’s proposal which is currently out for public consultation.”
Australia has already limited Chinese inbound investment on national security grounds. The bipartisan refusal to allow Chinese technology companies such as Huawei to participate in the construction of Australia’s 5G network continues to rankle Beijing, and twice this year the Foreign Investment Review Board has blocked Chinese companies’ attempts to lift their stake in critical minerals miners.
Mr Biden signed a long-awaited executive order last week that allows the US Treasury to outlaw American investment in Chinese entities that develop advanced semiconductors, quantum information technologies or artificial intelligence systems that have a military or intelligence purpose.
The White House said the ban applied only to a “narrow subset” of the technologies that posed a national security risk. At this stage, it remains a proposal and the US is seeking feedback from investors, industry and international partners.
But senior White House officials said last week that Mr Biden had discussed the issue with leaders at the G7 summit in Japan in May – which Mr Albanese attended – and cited the United Kingdom and European Union as well advanced with their own investment restrictions.
“The [People’s Republic of China] has a stated goal to acquire and produce key sensitive technologies that directly support the PRC’s military modernisation and related activities, such as weapons development, and has exploited US investments to develop domestic military and intelligence capabilities,” a White House official said last week.
“Key allies and partners have recognised the shared importance of this issue, and some are seeking to align our approaches together to maximise the effectiveness of our efforts collectively.”
Opposition home affairs spokesman James Paterson urged the Albanese government to consider a ban of its own.
“We can have no confidence that any intellectual property shared under these arrangements will be secure,” he said.
“When it comes to technologies that will not just be economically decisive but strategically and militarily too, extreme caution is required. It’s hard to see how any technology identified as a priority under pillar two of AUKUS should have Australian investment aiding China to compete in the tech race with the West.”
Strategic Analysis Australia director Michael Shoebridge, a former senior Defence Department official, said there had to be a consistent approach from the West on restricting investment in Chinese tech firms or research.
“We can undercut our policy intentions by letting Australian companies do things we don’t want them to be doing, like investing in Chinese companies which collude with their military, and undercut the controls our US and European partners are putting in place.”
Australia China Business Council national president David Olsson said it was still early days for the ban “but Australian business leaders are watching this carefully”.
“‘Derisking’ and ‘decoupling’ are the terms being used in the US and EU as the preferred approaches to manage these risks,” he said.
“In Australia, the government has focused more on ‘diversification’ to address over-dependency and other risks. Any move to ‘decouple’ our economy from China would be a fundamental change in the current direction of Australia’s strategic approach to the region. Fortunately, I don’t think we are at that stage yet.”
Benjamin Herscovitch, a research fellow at the Australian National University’s National Security College, questioned whether the Albanese government would match the US ban.
“These US moves highlight the growing chasm between Washington and Canberra on China policy. Despite years of suffering Chinese economic coercion and turbulent bilateral ties, Australia still sees its economic relationship with China primarily through the prism of trade opportunities.
“Australia has pursued defensive forms of economic statecraft against China by restricting Chinese investments in critical minerals and select other industries. But there’s little appetite in Australia for the kind of offensive measures against China that the United States has embraced.
“The gap between US and Australian economic approaches to China is likely to grow wider as the Biden administration doubles down on technological containment policies.”
“And this gap might grow into a yawning chasm if Trump wins in 2024 and pursues even harder-edged forms of economic nationalism.”
Meanwhile, a major defence pact will come into force on Monday, binding the Australian and Japanese militaries into closer cooperation.
The Reciprocal Access Agreement – the first agreement Japan has negotiated with a country since its 1960 pact with the US – will see Japanese and Australian forces conduct more training and exercises with each other, make it easier to store weapons in the other country and provide a legal framework for the deployment of troops.
The agreement will see Japanese F-35 fighter jets deploy to Australia for the first time in August, and Australian jets hosted by Japan in September.
“Both Australia and Japan recognise the increasing complexity of our security environment and the need to grow our partnership to support a stable and prosperous region,” Defence Minister Richard Marles said.
