The State Grid Corporation of China, the world’s largest electric utility company, was one of the bidders for the $10 billion NSW electricity transmission network, TransGrid, in a consortium with Macquarie Infrastructure Real Assets. The company’s bid  was cleared by the Foreign Investment Review Board but was eventually unsuccessful.

In Australia, State Grid is already the major shareholder in the non-listed ElectraNet which operates the South Australian electricity transmission network and is seeking to expand its stake. State Grid also has shareholdings in gas and electricity distributors in Victoria and NSW. In 2013, Singapore Power sold almost 20 percent of listed SP AusNet and 60% of the shares in the unlisted SPI (Australia) Assets (branded as Jemena) to State Grid. So State Grid is now part-owner of Victorian electricity transmission and distribution networks, as well as Victorian, NSW and ACT gas distribution networks and transmission pipelines. It appears that major efforts have been made to reduce political sensitivities to Chinese ownership of essential infrastructure in Australia by initially taking only partial shares in these companies. Further, Jemena has just been announced by the Northern Territory Government as thepreferred bidder for the $1 billion North East Gas Interconnector.

Within China, State Grid is the monopoly power distributor in all but five southern provinces. It is a massive state system under which there are a large number of provincial branches, branch companies and subordinate research institutes. State Grid is also intimately tied to a wide range of military and intelligence agencies across China, and relies on technologies from Huawei, a company banned from bidding on infrastructural projects in both Australia and the US, and declared by a US congressional committee to be tied to the People’s Liberation Army.

Subordinate companies and research institutes attached to State Grid include:

• The China Electric Power Equipment and Technology Co, which is the operations platform and implementer of State Grid’s international engineering, procurement and construction business.
• The China Electric Power Research Institute, headed by Guo Jianbo. This is located in Beijing and works at the cutting edge of global research in the areas of energy transmission and storage, grid programming, new energies, new materials and electrical and electronic engineering. As such it has close ties with military bodies. In December last year, the Institute was awarded a certificate by the PLA’s general logistics department certifying it as a key tester of military enterprise products. The Institute is also engaged in joint research on voltaic energy with GCL-Poly Energy, connected to the China Poly Group Corporation that was established by the General Staff Department of the PLA. The Institute also jointly researches and applies for patents with the PLA’s Research Institute of Chemical Defence.
• The State Grid Electric Power Research Institute, with branches in Nanjing and Wuhan, is involved in research and commercialisation of energy and automation systems, high-voltage technologies, electrical and electronic engineering and new technologies. It oversees 17 research institutes, eight State Grid branch enterprises and a further nine enterprises it has established. Joint energy research is conducted by the Institute with the PLA’s University of Science and Technology. The Wuhan branch also provides equipment to the PLA Air Force.

One of the major companies under State Grid is the Nanjing Nanrui Group whose subordinate companies generally bear the NARI name, such as NARI Technology Co., Ltd. NARI iscollaborating closely with the Beidou project, China’s alternate satellite navigation system intended to rival GPS. Beidou is, inter alia, linked to intelligence collection and is a weapons tracking and targeting system. Beidou is overseen by NORINCO, a PLA-backed weapons developer, which has recently signed an agreement with Alibaba, that involves the use of Beidou for cloud computing, big data accumulation and mining.

Another of NARI’s subordinate companies, Beijing Nari Zhixin Microelectronics Technology, also known as Beijing Nari Smart Chip (or IP Core), is  one of the top semiconductor companies in China, and is tied together with the PLA’s Information Engineering University and others in the PLA-led China Visible Light Communications Alliance. Again, the links with China’s communications intelligence activities are obvious.

In recent years, NARI has been expanding its presence in Australia. In April 2014 the NARI Group signed a 2.6MW rooftop power purchase agreement with an unnamed Australian customer. In December of that year, NARI won the bid for the Northern Sydney Substation Renovation Project from TransGrid. This month, NARI signed a contract with Jemena, 60% owned by State Grid, to provide control cables, medium-voltage cables, ABC cables and overhead conductors over the coming five years. The company proudly notes: ‘The project will be conducive to NARI products entering the list of long-term product supply of several other Australian power companies’.

Other State Grid-linked companies include:

• Nanjing Nari Relays Electric Co engages in research and manufacturing of digital protection, automation and control equipment for power systems. The company is a partner of Huawei.
• Xuji Group Corporation is another State Grid subsidiary coming under China Electric Power Equipment and Technology Co. Xuji Group is involved with the PLA Information Engineering University and others in a joint venture named Henan Zhongde Electric Power Technology Ltd Co. Xuji is also included in a  list of military industry companies, and the company has been inspected by senior PLA officials. Xuji has also been inspected by Li Changchun a member of the CPC Politburo.
• State Grid Xin Yuan Company represents State Grid as a member of the Chinese Chamber of Commerce in Cambodia’s Electric Power Enterprises Association, established in October this year.
• Yingda International Holdings Group is the assets management company of State Grid. Its subordinate company Yingda Asset Management has a director named Zhang Xiaoxia, a former senior PLA officer from the Nanjing Military Region heavily involved with nuclear industry companies.
• Henan Pinggao Electric Co. is a developer and producer of transmission and distribution switch systems. Some senior members of this company’s staff such as Zhang Haoyi came to the company from PLA-linked NORINCO.

A very major concern is State Grid’s involvement with Huawei. Huawei flaunts its connections with State Grid and provides the company with its Supervisory Control And Data Acquisition systems, which allow massivedata collection capacities. Integration of electrical and communications systems is growing apace and, with State Grid’s smart grid project’s passive optical networking technology (high-bandwidth data wiring that can be run inside electric power cables without interference), electricity networks are carrying and allowing the interception of internet, TV and telephony.

Australia blocked Huawei from participating in the NBN bidding process due to security concerns. This 2012 reportby the US Permanent Select Committee on Intelligence  concluded Huawei is tied to the PRC military and suggested that the company carries out R&D for China’s military and intelligence services, including cyber-warfare units. Huawei’s intimate ties with the Central Committee are reflected in the fact that it is named first in the list of state-linked operators that accompanied Premier Li Keqiang on his July visit to South America.

While the above are but a small sample of the immediately-identifiable relations of State Grid’s subordinate institutes/companies, these examples are sufficient to show intense and worrying links between State Grid and China’s military and intelligence communities. It is no exaggeration to say that a corporation as technologically sophisticated and as large and influential as State Grid is, through its companies, subsidiaries and research institutes, tied in some way to a wide range of intelligence and military organisations across China, with the relationships not restricted to the supply of electricity. They involve joint research, mutual provision of services, development of new technologies and materials, supply of equipment, electrical and electronic engineering collaboration, exchanges of staff, and a plethora of other interactions as required and determined by the Central Committee and its associated agencies in the implementation of state strategies.

State Grid is now operating in Australia with NARI and Huawei equipment. While its lack of success in the NSW Transgrid tender was a relief  to many in the Australian security and intelligence communities, what does the company’s continuing control of major infrastructure — and intent to control even more — mean for Australia’s current and future security?

When a Chinese state-owned company with intimate links to the military and to China’s intelligence activities gets the all-clear from the Foreign Investment Review Board to control major national infrastructure, and even to buy into the NSW electricity transmission network that carries optical-fibre communications between Australian government departments, the question must be asked: Are the processes of foreign investment consideration and approval in this country in need of revision?  At the same time, the urgent need for a public database of Chinese investment in Australia has never been more clear.

Geoff Wade is a visiting fellow at the Crawford School of Public Policy, Australian National University. This article originally appeared on The Interpreter on 18 December. It is republished with permission.