Chinese State-Owned Enterprises in Australia — Legal and Investment Challenges

Abstract

Chinese State-Owned Enterprises (SOEs) accounted for 84% by value of Chinese foreign investment in Australia. At the same time, SOEs have served as national ‘champions’ working for the advancement of China’s national interests. In some ways they have much in common with sovereign wealth funds. With the signing of the Free Trade Agreement between China and Australia, Chinese investment in Australia is likely to increase. Our main concern here is to examine China’s government-controlled SOEs, their characteristics and what this might mean for the way in which their investments are regulated. The SOE sector in China’s one-party state is currently being transformed by domestic reform efforts under the leadership of the Communist Party of China (CCP). Following the example set by the reform of the CITIC Group, the PRC government in 2014 announced plans to further reform its inefficient SOEs; it identified six large SOEs for a pilot program aimed at attracting private investment to SOEs and at improving SOE corporate governance and economic performance. By attracting private investment into SOEs, hybrid SOE-private sector structures may be created, leading to changes in both the ownership and the culture of the firms. Communist Party oversight of China’s SOEs will continue to be important, even if large state-owned firms enjoy a high degree of autonomy in their economic activities; as China’s SOEs ‘go global’, they will remain different from other foreign multinational companies and, as national champions, will continue to be driven by political as well as economic considerations. For this reason, they should not be treated in the same way as privately controlled foreign companies. This article explores these distinctive features of China’s SOEs which set them apart from other major foreign companies.

Keywords: China, multinational companies, corporate governance