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Asia Pacific – Overview Of The Australia-China Free Trade Agreement.

6 March, 2015


Legal News & Analysis – Asia Pacific


The recent signing of the Declaration of Intent by Australia and China to enter into a Free Trade Agreement (ChAFTA) presents a number of growth opportunities for Australian and Chinese investors. While the full text of the agreement is still being finalised, the two countries have released details of the agreed principles.


The standout feature is the removal of approximately 95% of tariffs on Australian exports to China within nine years, particularly in the agribusiness and primary produce industries. The hope is that Australian companies in these industries will see benefits comparable to those generated by the China-New Zealand FTA – New Zealand exports to China exponentially increased after the signing of the China-New Zealand FTA (increased by 290% from NZD 2.1bn to NZD 6.1bn between 2008 and 2012).


ChAFTA is also intended to provide increased market access for both countries in service sectors including health, aged-care and education.


The agreement will include an Investor State Dispute Settlement (ISDS) mechanism which will provide foreign investors with legal recourse against the host Government in respect of disputes relating to compliance with the terms of the Investment Chapter obligations of ChAFTA.


Another notable aspect of ChAFTA is the relaxing of some Foreign Investment Review Board (FIRB) restrictions for Chinese investors looking to enter the Australian market. ChAFTA will increase the FIRB review threshold from AUD 252m to AUD 1.092bn for Chinese private investors in non-sensitive sectors. The FIRB review requirements for investments in sensitive sectors (eg, telecommunication) and investments by government-related investors remain unchanged. The Government will also reserve the right to lower the review thresholds for private Chinese investment in agricultural land to AUD 15m and Chinese investments in agribusinesses to AUD 53m. These changes will bring China in line with other Asian countries which have recently signed bilateral FTAs with Australia, including South Korea and Japan.


Consistent with this focus on foreign investment in agribusiness, the Australian Government announced on 11 February 2015 that the AUD 15m review threshold will apply from 1 March 2015 to all foreign private investment in agricultural land. It will apply to the cumulative value of agricultural land owned by the foreign investor. The Government also plans to establish a foreign ownership register of agricultural land. From 1 July 2015, the ATO will start collecting information on all foreign investment in agricultural land regardless of its value and will conduct a stocktake of existing ownership of agricultural land by foreign interests.


The two Governments are in the process of finalising the full text of ChAFTA for translation, confirmation and ratification. The aim is for ChAFTA to be ratified and implemented by the end of the year.


herbert smith Freehills


For further information, please contact:


Belinda Fan, Partner, Herbert Smith Freehills
[email protected]




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