Josh Frydenberg should be congratulated for bringing about the most substantial reforms to Australia’s foreign investment laws since their introduction in 1975. This adds to recent strengthening of laws against covert foreign influencing and espionage, curbs on foreign donations to political parties and better controls over the ­security of critical infrastructure.

Australia is under stealth attack from countries intent on stealing intellectual property, corrupting our political leaders, using our research in ways that damage our security and looking for weaknesses in critical infrastructure that can be damaged with cyber hacking.

In February, ASIO director-­general Mike Burgess said “the level of threat we face from foreign espionage and interference activities is currently unprecedented — it is higher now than it was at the height of the Cold War”.

In large part, this hidden form of warfare is what is driving the foreign investment reforms. These changes have been on the Treasurer’s radar for some time.

When Scott Morrison was treasurer in 2016, he closed the loophole that made it possible for the then Northern Territory government to lease the Port of Darwin to a Chinese company, Landbridge, in 2015.

Announcing the foreign investment reforms on Friday, Morrison was at pains to say the Port of Darwin lease was not made on the ­approval or authority of the federal government. That’s true, but in 2015, and still today, it is the ­federal government that has responsibility for national security.

Now, some 1664 days since the Port of Darwin lease came into ­effect, we have shaped the right approach to protecting Australia’s national security interests at the same time as we continue to benefit from foreign investment.

The new laws will apply to investment from any country, but make no mistake about it, by far the biggest source of concern is China. Xi Jinping has reasserted the Chinese Communist Party’s authority over all Chinese businesses — not just the state-owned entities, but also the so-called “private” businesses that emerged out of opaque ownership structures in the 1980s and 90s. Sadly, Beijing’s move to scrap its 50-year agreement with the UK “guaranteeing” Hong Kong’s auto­n­omy means Hong Kong firms are also subject to CCP direction.

Chinese law requires all companies and individuals to co-­operate with the intelligence estab­lishment and to hide their co-operation. That, combined with the Chinese regime’s unrelenting cyber and human-source spying on our parliament, political parties, government departments, universities and businesses, is reason enough to conclude that foreign investment from China must be subject to the most stringent ­national security test.

Beijing will react badly to the government’s new foreign investment approach...

Beijing will react badly to the government’s new foreign investment approach, just as it reacted badly to the very necessary ban on travel from China at the height of the contagion in Wuhan. But privately, China’s biggest surprise will be that it has taken us this long to put some controls around its purchasing and taking advantage of Australian assets.

The reforms establish a national security test to “review any acquisition of a direct interest by a foreign person on national security grounds, regardless of the value of the investment”.

Work will need to be done to determine what exactly constitutes a sensitive national security business. Frydenberg anticipates this will cover information technology, telecommunications, critical infrastructure, energy, defence and data storage. It’s hard to see this not including areas important to national security such as artificial intelligence, biotechnology and novel materials.

A more difficult area will be to deal with the hundreds of millions of dollars of Chinese investment into Australian universities and research institutions.

Under Xi’s policy of “civil-­military fusion”, Chinese universities are increasingly focusing on research designed to strengthen the People’s Liberation Army and China’s intelligence apparatus.

We have been slow to realise that co-operation with Chinese research entities increasingly means that Australian intellectual property will serve Beijing’s military and intelligence objectives. To be effective, our new national security test will need to cover this area.

The reforms strengthen the Foreign Investment Review Board’s ability to make sure investors follow any compliance requirements, and it will increase penalties for failure to do so.

­Appropriately, the laws will only apply when they are passed, not retrospectively. But that leaves a big problem for the Morrison government, which is how to unpick the consequences of poor decisions over many years that led to much of our electricity grid, gas pipelines and ports being sold into Chinese hands.

The government is understandably reluctant to overturn past decisions in ways that might lead investors to worry about ­sovereign risk, but consider this: if the government used its broader constitutional powers on national security grounds to resume ­control of the Port of Darwin, compensate Landbridge and then re-lease the port under the new foreign investment rules, the message to investors would be overwhelmingly positive.

The US, which is by far our ­biggest foreign investor, along with the UK, Canada and the other key democracies would conclude that Australia is taking its national security seriously. There could be no better way to en­courage foreign investment from like-minded ­democracies — the countries that won’t economically threaten or spy on us and treat our political leaders with contempt.

These proposed new investment laws are another welcome step on Australia’s journey to stand up for its own national security interests and turn its back on the “pragmatic and nuanced” tactic of just shutting up and taking China’s money at the price of our national security and values.