The development project is on the edge of the Victoria River region, just across the border in West Australia. Many Northern Territory businesses were expecting to be involved in supply and service contracts as the mine moved into production.

For ASEAN investors, the FIRB decision raised the perceptions of the level of sovereign risk when it comes to investing in Australia.

This was just the latest move in a series of actions which are creating concern amongst those companies which have Chinese interests on their share register. This includes those at arm’s length such as Singaporean and Hong Kong fund managers who may have Chinese shareholders on their share registers or as a source of funds for management.

All of this in turn impacts on investment decisions for those in the Northern Territory who hold shares in these companies and investment funds or who do business with companies that may be impacted by this, and similar decisions.

This is not a positive story about Northern Territory and China relations, but it needs to be examined so business and investors can make more informed decisions. It is an emerging risk.

Sections of resource development in the Northern Territory are an immediate and obvious concern. Astute Australian and Singaporean investors have built positions in a number of Australian emerging rare earths companies, including Arafura Resources, Lynas, Arcadium Lithium and Northern Minerals. For investors, large and small, this has delivered ground-floor exposure to an expanding industry with both strong links to Chinese investment capital and the China markets for their offtake.

The Northern Minerals forced divestment decision has major consequences on existing rare earths projects and the planned expansion of these projects. The Australian rare earths industry is largely a product of Chinese investment and expertise.

The industry raised these concerns in May at a mining summit in Western Australia. A large portion of West Australian mining projects have been developed with the support of Chinese dollars and Chinese investment over the past two decades.

The issues they raised should concern Northern Territory investors who have used these companies as a way to ride both the boom in rare earths for electric vehicles and as a way of participating in the consistent rise in Chinese demand.

Conference attendees were told the industry couldn’t see a future where Australia and China don’t co-invest together. “You’ve just got to understand there is a coexistence that needs to occur,’’ Arcadium Lithium chairman Peter Coleman said.

The recent FIRB changes in investment priorities not only impact on capital raisings and offtake agreements. They also impact on a broader range of industries which may be forced to restructure their share register or be excluded from some activities. The collateral damage can impact pipeline companies, civil construction groups and other infrastructure providers.

Chinese investment in Northern Territory industries as diverse as the pastoral industry, agriculture and horticulture may reconsider their future engagement and expansion plans. The flow-on impact means less business opportunities for Northern Territory contractors as investment shrinks.

This can be seen as part of a wider move towards raising protectionist walls against China. The adoption in the United States of the Smoot- Hawley Tariff Act in 1930 worsened the impact of the Great Depression by destroying international trade.

The 1930 Act did not hide behind a security focus and nor was it directed at a specific country. It is these differences that add a contagion complication to the current protectionist barriers that are enacted in the United States under a variety of different Acts.

There is increasing pressure on Australian companies to follow suit. The new changes to the Foreign Investment Review Board regulations in Australia make this explicit, with investment from ‘friends’ receiving priority and an express regulatory pass. Inevitably this will flow onto businesses operating in the Northern Territory as they may be excluded from work, forced to withdraw investment capital or they may decide not to invest.

This is already seen in an increasing tendency for US investors to withdraw from the China market.

This is most often in response to political pressure. The tentacles of this pressure extend way beyond the direct US company relationships with China.

A colleague runs a large private equity firm in Singapore and another colleague, a prominent VC fund.

Both complained they are being “cautioned” by institutional investors not to have Chinese “anything” in the portfolio or face withdrawals and backlash. This is an extension of US policy pressure, particularly on US institutional and fund investors.

This is a new area of risk that Northern Territory business, investors and those seeking investment capital will need to take into account. The Territory Asia Engagement and Investment strategy is not exempt from these risks as some of the companies and fund managers being courted have Chinese interests and capital in their structure.

This is the least positive of all the China columns I have written over the past decade, but the impact on the Northern Territory of these changes to the capital and investment environment cannot be ignored. Readers will decide if this is good or bad for the Territory