Beijing has urged Australia to treat Chinese investment firms fairly, a week after the federal government rejected two bids from the country for a stake in its biggest energy grid. Last week Treasurer Scott Morrison blocked bids from the Chinese Government-owned State Grid Corp and Hong Kong-listed Cheung Kong Infrastructure for a 99 year lease on New South Wales power supplier Ausgrid. "It's the second time this year Australia's government has decided against Chinese applications to conduct business investment in Australia," Chinese Commerce Ministry Spokesman Shen Danyang said. "This kind of decision is clearly protectionist and seriously hurts the enthusiasm from Chinese companies to invest in Australia." Mr Morrison had given the companies a week to respond to the decision. But in an interview with Sky News, he would not say if either had done so. "This was a transaction that provided operational control of this asset and there were some very specific characteristics of this asset which gave rise to the national security concerns," he said. The government insisted while it still wanted China to invest in Australia, last week's decision was the right one. "This country has a warm and welcoming approach to foreign investment," said Resources Minister Josh Frydenberg. "But we will not compromise on national security implications and I don't think the Australian people would expect us to." Mr Danyang said China remained skeptical. "Australia says it welcomes Chinese investment but its actions tell a different story," he said. "The Ministry of Commerce hopes Australia will create a fairer and more transparent environment for Chinese investment." China State Grid already has huge stakes in power companies such as Jemena and ElectraNet. China protests Aust decision on Ausgrid Government denies race or politics in Ausgrid decision

Growing concern

Peter Jennings, executive director of the Australian Strategic Policy Institute, said China was probably surprised by how much it had been allowed to invest in Australia's critical infrastructure until now.

He argued that the current climate rendered countries more cautious about accepting Chinese investment in critical infrastructure that was become increasingly vulnerable to hacking.

"The reason Australia came to this decision was because of Chinese actions, as a cyber hacker, as an offensive military power in the South China Sea," he said.

"China can't pretend its behavior is something it can undertake and simply have their foreign investment accepted as though it's coming from a state like Canada."

Mr Jennings said the decision could lead to policy reviews by both sides.

"I don't think there are going to be any long-term consequences for this, and it should really be seen as an opportunity for the two countries to have the right type of discussion now about where Chinese foreign investment is acceptable," he said.

"I think it's going to concern China that both Australia and the UK have taken moves restricting foreign investment in critical infrastructure recently.

"I think this will start to ring some warning bells in Beijing that perhaps they've gone too far in terms of their nationalistic foreign policy."

Mr Jennings said hacking had been an emerging issue that countries around the world are increasingly worried about.

"I think the thing that needs auditing is the cyber vulnerability of critical infrastructure: ports, the electricity grid, airports, areas where increasingly cyber systems control the operation of those economic utilities.

"What's happened in the last five years is the internet has become significantly more [a] part of how industrial control systems work.





"Australia should thoroughly review its systems to ensure they cannot be hacked," he said.

"We can't pretend that China is anything other than one of the most aggressive hackers we have to deal with when it comes to cyber security."