China and Australia’s relationship has faced significant challenges in recent years, with trade disputes, security concerns, and differing political stances creating tensions. However, despite these conflicts, China remains one of the largest and most influential foreign investors in Australia.
The Scale of Chinese Investment in Australia
According to data published by KPMG, Chinese Overseas Direct Investments (ODI) into Australia from 2006 to 2023 have totaled a staggering $113 billion USD. Although Chinese investment in Australia has seen a decline in recent years, its cumulative impact remains substantial. For perspective, Australia’s economy stood at approximately $1.7 trillion in 2023, meaning Chinese investments accounted for roughly 6.65% of the country’s GDP.
These investments span multiple sectors, but one of the most controversial has been Australia’s energy sector. Given Australia’s vast natural resources and its critical role in energy production, foreign ownership of key energy assets has sparked debates regarding energy sovereignty, national security, and foreign influence.
EnergyAustralia: A Case Study in Foreign Ownership
EnergyAustralia is one of Australia’s largest energy retailers and generators, serving over 2.4 million customer accounts across Eastern Australia. To put this into context, Australia’s total population is approximately 26 million, meaning EnergyAustralia services a significant portion of the country’s households and businesses.
As a major energy generator, EnergyAustralia also owns significant infrastructure, including the Mt Piper Power Station, which produces 1,430 megawatts (MW) of energy. To illustrate the scale, one MW can power approximately 1,460 homes, meaning this power station alone can provide electricity to around 2.09 million homes.
Who Owns EnergyAustralia?
Despite its critical role in Australia’s energy sector, EnergyAustralia is not Australian-owned. Instead, it is a subsidiary of the Hong Kong-based CLP Group (China Light and Power Company), one of the largest investor-owned power businesses in the Asia-Pacific region.
CLP Group acquired EnergyAustralia in 2011 through its subsidiary, TruEnergy, for approximately $2 billion AUD. This acquisition was part of the New South Wales government’s privatization efforts, leading to one of Australia’s largest energy providers being transferred from public ownership to a foreign-controlled entity. This shift raised concerns about energy sovereignty and foreign influence in essential services.
The Growing Footprint of Chinese Investment in Australian Energy
EnergyAustralia is not the only example of foreign influence in Australia’s energy market. Chinese investment in the country’s power infrastructure extends beyond a single company:
- ActewAGL Distribution (Australian Capital Territory – ACT)
- This energy provider is jointly owned by the ACT government (50%) and Jemena Limited (50%).
- Jemena is an energy infrastructure company that is 60% owned by the State Grid Corporation of China (SGCC) and 40% owned by Singapore Power.
- SGCC is a Chinese state-owned enterprise, meaning that the Chinese government has a direct stake in ACT’s energy infrastructure.
- Electricity Distributors in Victoria
- Victoria has five major electricity distributors: United Energy, Powercor, CitiPower, Jemena, and AusNet Services.
- State Grid Corporation of China owns 20% of AusNet Services and is also the majority owner of Jemena, which in turn owns Jemena Electricity Distribution Victoria.
- State Grid also holds a 34% stake in United Energy Electricity Distribution Victoria.
Similar patterns of Chinese or Hong Kong-based ownership can be observed in South Australia and New South Wales, demonstrating how deeply intertwined Chinese investments are with Australia’s energy sector.
Does Foreign Ownership Matter?
Foreign investment is not inherently problematic, as it contributes to economic growth and development. Many nations, including Australia, welcome foreign investments to support infrastructure expansion. However, concerns arise when these investments involve critical industries such as energy, telecommunications, and defense.
One of the primary concerns is energy security. In recent years, the Australian government has faced increasing pressure to review Chinese state involvement in the national electricity grid. Some experts worry about foreign influence over essential infrastructure, citing potential risks such as:
- Cybersecurity Threats and Foreign Interference
- In 2018-2019, data from the Australian Bureau of Statistics showed that China had overtaken Vietnam as the leading supplier of transformers for Australia’s energy grid.
- Transformers are a critical component of the power grid, essential for electricity transmission. Any disruption—whether accidental or intentional—could have devastating effects on Australia’s economy and national security.
- Concerns Over Equipment Security
- Security analysts have warned that foreign-built transformers could be compromised with malicious components designed for remote disruption.
- These fears were amplified when former U.S. President Donald Trump issued an executive order in 2020 restricting foreign-sourced electrical equipment, citing national security threats from “foreign adversaries.”
- Political Influence and National Interest
- Some Australian policymakers have expressed concerns over Jemena’s leadership, as reports indicated that some executives had past affiliations with the Chinese Communist Party (CCP).
- Although the companies involved have denied security risks, the perception of foreign government-linked entities controlling key infrastructure remains contentious.
The Debate: Economic Benefit vs. National Security Risk
On one hand, foreign investments from China and Hong Kong provide economic benefits, infrastructure development, and employment opportunities. On the other hand, critics argue that allowing foreign ownership of essential services, especially from a country with differing political ideologies, may expose Australia to security vulnerabilities.
The real question is whether the Australian government should impose stricter regulations on foreign ownership of energy assets. Some have called for reforms, including limiting the sale of critical infrastructure to foreign entities, mandating higher security standards for foreign-manufactured energy equipment, and strengthening oversight of foreign investments in essential industries.
Regardless of where one stands on the issue, the reality is that a significant portion of Australia’s energy sector is already under foreign control. As Australia continues to navigate its complex relationship with China, the debate over economic cooperation versus national security will likely remain a critical issue in the years to come.