EABER Working Paper Series, No 81
China’s overseas direct investment (ODI) in Australia has attracted adverse public reaction, similar to the reaction to Japanese investment in the late 1980s. Publicly aired concerns focus on Chinese ODI which is predominantly from state-owned enterprises and is perceived as a risk to Australia’s control over its wealth-creating assets. This perception is exacerbated by a lack of understanding of the institutional environment within which China’s state owned investors operate and the scale of investment. The current Australia—China investment relationship has involved an awkward interaction between public reaction, policy response in Australia, and adaptation by Chinese investors and institutions. Adaptation by Chinese investors has seen increased attempts to gain local legitimacy but has also potentially diverted largescale resource investments to other resource rich countries such as Guinea and Mongolia. Resolution of this reaction, response and adaptation process will require a deeper bilateral policy dialogue and increased investment transparency from state-owned investors and the related institutions on both sides.