FILE PHOTO - The logo for Australia's biggest electricity network Ausgrid adorns the main entrance to the headquarters building in central Sydney, Australia, July 25, 2016. REUTERS/David Gray/File Photo

By Jonathan Barrett and Sue-Lin Wong

SYDNEY/BEIJING (Reuters) – Australia’s decision to block the A$10 billion ($7.7 billion) sale of the country’s biggest energy grid to Chinese bidders was a protectionist move that would negatively affect investment in the country, China’s Ministry of Commerce said on Wednesday.

Australian Treasurer Scott Morrison said last week that preferred bidders State Grid Corp of China and Hong Kong’s Cheung Kong Infrastructure Holdings would be prevented from buying electricity network company Ausgrid, citing unspecified national security concerns.

FILE PHOTO – The logo for Australia’s biggest electricity network Ausgrid adorns the main entrance to the headquarters building in central Sydney, Australia, July 25, 2016. REUTERS/David Gray/File Photo

“This kind of decision is protectionist and seriously impacts the willingness of Chinese companies to invest in Australia,” China Commerce Ministry spokesman Shen Danyang said at a regular news briefing in Beijing.

“China hopes Australia will create a fairer and more transparent environment for Chinese investment.”

Australia’s decision to reject the Ausgrid bids underscored the country’s changing political climate since a handful of protectionist senators took power in elections last month.

The decision also sets new parameters to the relationship between Australia and its biggest export partner just eight months after a A$100 billion free trade agreement took effect.

Beijing’s reaction mirrored comments made following a surprise move by new British Prime Minister Theresa May to review the building of a nuclear plant part funded by China, with Beijing questioning whether Chinese money was still welcome in Britain.

Morrison’s decision – major foreign investments require the Treasurer’s approval – was the second time this year Canberra has rejected bids for major Australian assets by Chinese interests.

It previously knocked back an offer by a China-led consortium to buy the country’s largest agricultural land owner, cattle company Kidman & Co.

Australian Prime Minister Malcolm Turnbull used a major speech on Wednesday to criticise the rising tide of protectionism within parliament, despite his government being responsible for the rejection of the Ausgrid and Kidman bids.

“Political divisions in advanced economies – particularly where there is high unemployment or a high risk of unemployment – are feeding on a sense of disenfranchisement among many people who feel the rapid economic changes of our time have left them behind,” Turnbull said.

The speech warned against giving in to the growing protectionist mood reflected in the new parliament, which he said could reverse gains made by the country since it liberalised its economy two decades ago.

“Political responses to this mood of disaffection can have the potential to destabilise global growth, perhaps even reversing some of the spectacular gains we have made over recent decades through open markets and free trade.”

Turnbull’s conservative Liberal-National coalition has a one-seat majority in Parliament’s lower house but must rely on either the main opposition Labor Party or eight to 10 independents or minor party Senators to pass laws in the upper house.

The new parliament, which sits for the first time on August 30, includes a bloc of foreign investment critics led by the Far-right One Nation party.

($1 = 1.2992 Australian dollars)

(Additional reporting Matt Siegel in SYDNEY and Michael Martina in BEIJING; Editing by Lincoln Feast)

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