Australia warned over grid deal block

China's Ministry of Commerce says the move by Australia to block the sale of AusGrid to Chinese firms is another sign of growing trade protectionism in that country.

On August 11, the Australian government announced it was not going to allow the State Grid Corporation of China and Hong Kong-listed Cheung Kong Infrastructure Holdings from buying AusGrid.

The joint bid was worth $7.7 billion.

Unspecified national security concerns were cited, but the companies were given one week to amend their bids to mitigate risks.

Shen Danyang with China's Ministry of Commerce notes State Grid had been allowed to enter the binding bidding stage before the decision was made.

"The MOC also notices that this is the second time this year the Australian government has made decisions to block Chinese applications to conduct business investments in Australia. This decision clearly shows a trend toward trade protectionism, which will severely hurt Chinese enterprises' enthusiasm in investing in Australia."

Shen Danyang also says Australian officials need to back up their promises with action.

"The Australian side has said many times that it welcomes investment from Chinese companies, but then reverses their decisions. The Commerce Ministry hopes Australia's government works to create a fairer, better and more transparent trade and investment environment for Chinese enterprises."

This is the second time this year that Australian authorities have rejected bids by Chinese companies for the purchase of major Australian assets.

An offer by a China-led consortium to purchase the country's largest agricultural land owner, cattle company Kidman & Company, was rejected by Australia's government over national security concerns.

For his part, Australian Prime Minister Malcolm Turnbull has been critical of what he views as a growing protectionist mood among Australian lawmakers.

"Protectionism and inward-looking policies are starting to gain a foothold. Political divisions in advanced economies, particularly where there is high unemployment or a high risk of unemployment, are feeding on a sense of disenfranchisement among many people who feel the rapid economic changes of our time have left them behind. Political responses to this mood of disaffection can have the potential to destabilize global growth, perhaps even reversing some of the spectacular gains we have made over recent decades through open markets and free trade."

China is a critical trade and investment destination for Australia, with much of the country's mineral wealth being sold to China.

China has also become a major investor in Australia in recent years.

The overall relationship has been reflected through the upgrading of their official ties to a comprehensive strategic partnership at the end of 2014.

A free trade agreement signed by the two countries officially took effect last year.