Foreign Investment, the National Interest and National Security - Foreign Direct Investment in Australia and China

China and Australia are major trading partners. Both countries have policies to encourage inbound foreign investment and they have both been very successful in attracting it. The approaches of the governments of Australia and China to the admission of foreign direct investment (‘FDI’) provide an interesting comparison for a number of reasons. First, despite their success in attracting FDI, both Australia and China are rated by the Organisation for Economic Cooperation and Development (‘OECD’) as countries which maintain restrictive regimes in relation to the admission of foreign investment. Second, both Australian and Chinese companies and funds invest extensively overseas. Chinese companies in particular have become major investors in Australia, although Australian companies do not invest in China to anywhere near the same extent. Third, both countries rely heavily on concepts of the national interest and security in their FDI policies. Australia maintains a case by case screening regime based on a ‘national interest’ test; China has a detailed, highly regulated investment structure and review process which draws on concepts of ‘national security’ and ‘national economic security’, and has recently added an extra case by case review of certain foreign acquisitions on the basis of a ‘national security’ test. The purpose of this article is to examine and compare the concepts of national interest and national security and to consider what role they play in the admission of FDI in Australia and China. The article concludes that the ‘national interest’ and ‘national security’ criteria in Australia and China do in fact have many conceptual similarities and respond to a number of similar issues. However, the application of these concepts has taken regulatory directions which are fundamentally different.