China’s infrastructure investors have had a tough two weeks, with plugs being pulled on at least $15 billion of potential deals in nuclear power and electricity distribution. Britain and Australia refused to sign off on investments where state-owned Chinese companies were ready to provide much-needed funding. In both cases, the long-term utility programs were halted in the later stages, stunning participants. Those in the U.K. were all set to join a signing ceremony when the announcement came.

“As China’s diplomatic policies become more and more assertive, there has been a trend that some of these countries are gradually enhancing their vetting on Chinese investment,” said Tao Jingzhou, a managing partner at Dechert LLP in Beijing. “This is an attitude change.” Chinese firms in the midst of a record overseas spending spree are buying foreign utilities at their fastest pace in eight years, according to data compiled by Bloomberg. Infrastructure deals, especially, are set to come under increased scrutiny by incoming governments wary of giving China access to their nations’ critical networks.

U.K. Prime Minister Theresa May’s government is reconsidering a plan to build Britain’s first nuclear-power facility in more than 20 years. China General Nuclear Power Corp. had agreed to pay for about one-third of the 18 billion-pound ($23.4 billion) project that has been in progress for years. May’s administration said last month that it wanted more time to study the deal.

One of May’s advisers, Nick Timothy, warned last year that China’s involvement in nuclear projects might allow it to “shut down Britain’s energy production at will.” Two weeks after the U.K. decision, Australia Treasurer Scott Morrison said a proposed sale of the Ausgrid electricity network could endanger national security. Government-owned State Grid Corp. of China was vying with Hong Kong billionaire Li Ka-shing for control in a deal worth more than A$10 billion ($7.7 billion), people familiar with the matter said earlier. Both had submitted binding bids.

The more assertive a country makes its foreign policy, the harder it will be for partners like Australia to accept its foreign investment,” said Peter Jennings, executive director of the Australian Strategic Policy Institute. “It is a difficult message for China to receive, but a necessary one.”

China has been reclaiming reefs in the South China Sea, and an international tribunal ruled last month that the nation’s efforts to assert its control there exceeded the law. Australia and the U.S. were among the nations urging China to respect the ruling.

Ogie Omelegie
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