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  • Easing of Australia’s foreign investment review threshold for private Chinese companies from $248 million to $1.078 billion.
  • Review threshold for private Chinese investment in commercial real estate will be increased from $248 million to $1.078 billion.
  • Australia reserves the right to screen investment proposals in agricultural land valued from $15 million and agribusiness from $53 million.
  • No change to the screening requirements of acquisitions by the Chinese state owned enterprises.


The China - Australia Free Trade Agreement (ChAFTA) will relax the foreign investment review requirements for Chinese investors, placing them on par with investors from Australia’s other free trade partners. Some aspects of the change are likely to have immediate practical impact on Chinese investments when the ChAFTA comes into effect; other aspects may be of more symbolic value.

Both countries agree to re-examine certain sticking points in trade negotiations in three years. One of these points is the foreign investment review threshold for Chinese state owned enterprises.

What will change under ChAFTA?

  • General review threshold increased: The Foreign Investment Review Board (FIRB) screening threshold in non-sensitive sectors will be raised from $248 million to $1.078 billion which is consistent with the free trade agreements brokered between Australia and its other recent bilateral free trade partners: Japan, Korea and the United States.

    It is worth noting that, for these other free trade partners, the higher review threshold comes with some practical limitations. For example, the higher review threshold is only applicable if the investing entity has a specific connection with the relevant foreign country. In order to enjoy the higher threshold, the investing entity must be constituted or located in the foreign jurisdiction which is entitled to the higher threshold (e.g. Japan, Korea and the United States). Investments through an Australian subsidiary or an entity based in a foreign jurisdiction which is not entitled to the higher threshold would not qualify for the higher threshold. Similar limitations are likely to apply to the application of the higher review threshold under the ChAFTA.

  • Private investments in commercial real estate: Investments in commercial real estate will now fall under the non-sensitive sector threshold of $1.078 billion, which is an increase from the current review threshold of $248 million.

    Foreign investment review of property investments is hardly a significant roadblock under the current system - FIRB did not object to any property investments in 2012/2013. However, this “special treatment” of Chinese property investors is likely to further enhance Australia’s attractiveness as a destination for Chinese commercial property investments. Again, the finer details of any limitation on this higher threshold will be available once the full text of the ChAFTA is released.

  • Lowering of agribusiness review threshold flagged: As was the case in the Japan-Australia FTA and the Korea-Australia FTA, Australia has reserved the right to apply a lower review threshold in the agriculture sector. The ChAFTA contemplates that the review threshold for investment in agricultural land will be lowered to $15 million and the review threshold for investment in agribusiness will be lowered to $53 million. These thresholds are consistent with the recommendations issued by the Senate’s Rural and Regional Affairs and Transport Reference Committee’s report on Foreign Investment Review Board issued in June 2013.

What has remained unchanged?

  • Chinese foreign government related investors: Australia has not changed its position on review of investments by foreign government related investors in any of its recent free trade agreements. One of the most eagerly watched aspects of the ChAFTA was whether Australia would grant special treatment to Chinese state owned enterprises.

    China has argued that it is justifiable to apply different standards for China because a significant portion of its foreign investments are undertaken by state owned enterprises. To put this in context, 67% of Chinese investment transactions in Australia over the last 8 years has come from state owned enterprises.

    Despite this, it was determined that investments by Chinese state owned enterprises remain subject to the same review process applicable to all foreign government related investors. Direct investments (generally 10% or more) by such investors continue to require scrutiny of the Foreign Investment Review Board.

    Australia has agreed to defer this issue to the three-year review of the ChAFTA.

  • Sensitive sectors: The current review thresholds for sensitive sectors including media, telecommunications and defence are unaffected by the ChAFTA.

More to come

The text of the ChAFTA will be finalised over the next few weeks and released to the public once internal legal review has been completed by both countries.

Herbert Smith Freehills will provide a comprehensive update when the text of the Agreement is made available to the public.