* Australia halted A$10 bln grid sale to State Grid Corp of
* Xinhua laments Australia's "mixed signals" to Chinese
* Block due in part to South China Sea disputes -coalition
* Move follows UK delay to nuclear deal involving China
By Byron Kaye, Jonathan Barrett and Matt Siegel
SYDNEY, Aug 12 Australia blocked the sale of a
major power grid company to Chinese interests in part over
concerns that China, its biggest trading partner, is becoming a
geo-political threat, a senior member of Australia's government
Treasurer Scott Morrison, from the country's pro-business
centre-right coalition, halted the A$10 billion ($7.7 billion)
sale of Ausgrid to government-owned State Grid Corp of China
and Hong Kong's Cheung Kong Infrastructure Holdings
on Thursday, citing national security issues.
"The South China Sea disputes, the increased recognition
that the Chinese regime is more authoritarian than we originally
thought and the fact we are dealing with a state-owned
enterprise; those three things have suspended people's
free-market instincts," a senior member of Australia's ruling
Coalition told Reuters.
While China's growing militarisation of the South China Sea
has been a source of rising diplomatic and military tension with
neighbours and the United States, the Australian decision
indicates that trade matters could also be caught up in
Last month, an arbitration court in The Hague ruled China
did not have historic rights to the South China Sea, where it
has built airstrips and other structures on disputed islands and
artifically reclaimed land. China has rejected the court's
The Ausgrid intervention came shortly after an eleventh-hour
move by British Prime Minister Theresa May to delay a final
decision on building a nuclear plant part funded by China.
Some fear blocking the Ausgrid deal will damage relations
with a vital trading partner and disrupt the sale of other
state-owned assets and private deals involving foreign bidders.
The China state-owned news agency Xinhua said on Friday that
the decision was a "another demonstration of (Australia's)
obscure and inconstant strategy towards Chinese investors".
"If Australia keeps sending mixed signals to Chinese
bidders, it would eventually cast the impression as an
unpredictable investment environment to Chinese buyers as well
as other potential investors."
Australia also recently rejected a bid for the country's
largest agricultural landowner, S. Kidman & Co, led by China's
Hunan Dakang Pasture Farming Co Ltd.
Morrison's intervention over Ausgrid, which operates New
South Wales state power networks - major foreign investment
deals require his approval - also casts a cloud over several
impending sales, as the country's second-largest state,
Victoria, and resources-rich Western Australia also have large
infrastructure assets to sell.
"We've been watching Ausgrid pretty closely and, like many
people, we would love to know what national interest means,"
said one person involved in selling another major asset, who
asked not to be named.
Morrison rejected suggestions on Friday his decision was
aimed at Beijing. He said it was "not a country-specific
decision". He did not detail exactly what the national security
Since the former Australian treasurer, Joe Hockey, waved
through State Grid Corp of China's purchase of a 60 percent
stake in energy infrastructure company Jemena in 2013, the
Australian political climate has shifted.
A 2015 lease of the Port of Darwin to Chinese interests said
to be close to the People's Liberation Army sparked an outcry
about the country's foreign purchase approvals process,
including from U.S. lawmakers concerned about security
General elections in July this year gave control of the
Australian Senate to an assortment of protectionist
independents, forcing the same governing party that once
welcomed State Grid Corp of China to suggest it was a security
"The danger for us is to pretend that there's some sort of
invisible separation barrier between how China behaves
militarily in the region on the one hand and how it directs
investment on the other," said Peter Jennings, executive
director of think-tank Australian Strategic Policy Institute and
a former defence department official.
State Grid, China's dominant power distributor, did not
immediately respond to requests seeking comment after the
Ausgrid decision. Cheung Kong Infrastructure (CKI), controlled
by Hong Kong billionaire tycoon Li Ka-Shing, said the decision
was not related to CKI.
The increased tension between Australia and China comes just
eight months after a A$100 billion free-trade agreement took
effect between the trade partners.
Former Australian Senator Sean Edwards told Reuters that
many members of the ruling Coalition felt uncomfortable with the
sale of critical infrastructure to foreign state-owned
"I think what happened at Darwin Port was ill conceived, and
the result of that was something that was poorly managed in
terms of due diligence," he said.
"Ultimately the federal government couldn't touch that or
overturn it because it didn't have jurisdiction. But in this
case, with Ausgrid, I fully support the Treasurer's decision."
($1 = 1.3007 Australian dollars)
(Additional reporting by Colin Packham; Editing by Will