This suggests there are some concerns about the increasingly close links between Hong Kong's tycoons and Beijing.

The citing of "national security" concerns will only add to the outrage from China's state media.

But this will be little more than noise.

Diplomats on both sides know it will have minimal impact on the longer term relationship and the outrage will not go far beyond the talking points.

What China's State Grid owns.

That said, China does have some reason to feel aggrieved.

But this is more to do with process rather than the initial rejection.

Government figures have always made the point it's the regulatory uncertainty around Australia's foreign investment rules which annoys Chinese firms the most.


This is somewhat ironic as vaguely-defined regulation is a constant for foreign businesses operating in China and indeed it often gives local firms an advantage over their multinational rivals.

Putting this aside, the complaint from China Inc. is that they must go through a long and expensive bidding process only then to be told their proposed transaction is not in the national interest.

They would prefer a so called "negative list" which sets out what sectors they can and can't invest in, rather than deals being considered on a case by case basis.

This is not going to happen any time soon and the rationale behind the government's decision on Thursday is pretty clear.

As Treasurer Scott Morrison has pointed out it all comes down to national security.

Sources have indicated this is less about specific worries over current Chinese behaviour, rather the longer-term strategic environment.

"Who's to say what the chess board will look like in 50 years time," said one government figure.

The point is that while China might be a menace in the security sense at present, an openly hostile Beijing can't be ruled out over the next half century.


On that basis, selling critical electricity infrastructure to a company directly controlled by the Chinese government or closely linked to it, hardly seems like a good idea.

More than anything, the rejections show FIRB is finally starting to consider the strategic implications of Chinese investment in Australia.

This can perhaps be attributed to the appointment of former spy chief David Irvine to FIRB's board.

His presence should ensure there is no repeat of last year's debacle around the Port of Darwin, which was sold to a Chinese company with strong links to Beijing.

