"The United States, the United Kingdom and other countries are making significant reforms to their foreign investment regimes, particularly in respect of national security issues.
"While Australia has an effective foreign investment framework, it is important that we understand what other countries are doing and what we can learn from them. The board will continue to examine ways to streamline and strengthen foreign investment review processes."
Under Mr Irvine, a former ambassador to China and head of Australia's domestic spy agency, FIRB has taken a tougher line on Chinese investment.
For the first time since 2012-13, the US surpassed China as the largest source country for approved proposed investment due to an increase in US approvals and a decline in Chinese approvals. The US received approved investment of $36.5 billion in 2017-18, with significant increases in real estate and the manufacturing, electricity and gas sector, FIRB said.
China was the second-largest source country following a decrease in approved proposed investment to $23.7 billion, from $38.9 billion in 2016-17.
Western countries are re-evaluating their foreign investment regulations, especially for strategic sectors in the wake of a buying spree by Chinese entities.
Amid regrets the UK waved through some Chinese takeovers in sensitive sectors, Britain has issued a white paper on foreign investment that notes, "technological, economic and geopolitical changes mean that reforms to the government's powers to scrutinise investments and other events on national security grounds are required".
Donald Trump's national security strategy warned the "national innovation base" should be protected from China's efforts to gain control of critical companies and technologies.
The US Congress passed the Foreign Investment Risk Review Modernisation Act (FIRRMA) last year to review a broader range of transactions, including any "non-passive" investment in US firms involved in critical technology or other sensitive sectors.
It also gave the powerful US inter-agency panel that screens foreign transactions, the Committee on Foreign Investment in the United States (CFIUS), greater power to suspend transactions, increased funding and staffing for the agency, and mandated a separate process to review the export of sensitive US technologies, according to the Council on Foreign Relations in Washington.
Less of a priority for Australia
Protecting sensitive technologies has been less of a priority for Australia, because the US has a more intellectual property-intensive economy, being home to many of the world's leading mature tech companies and start-ups in Silicon Valley.
However, Australia is advancing in innovation, including for quantum computing being developed at Australian universities in partnership with the Department of Defence, American technology and defence firms and, in some cases, Chinese entities.
Mining companies such as BHP and Rio Tinto have world-leading mining technologies, and resources firms have been the victims of attempted foreign cyber hacks in the past.
Experts believe Australia's foreign investment review process lacks a coherent framework, too often leading to ad-hoc debates between the China hawks in national security agencies agencies and pro-investment officials at Treasury and the Department of Foreign Affairs and Trade.
Fergus Hanson, Australian Strategic Policy Institute head of international cyber policy, said the Defence Exports Controls Act, which regulates the export of defence and dual-use goods, needed toughening up to address China's People's Liberation Army collaborating with local universities on developing sensitive technologies such as quantum computing and artificial intelligence.
"Foreign adversaries can also steal technologies through cyber means so there should be cyber security standards to make sure companies protect the sensitive technologies," Mr Hanson said.
He said It appeared FIRB was considering alternative ways to judge foreign investment proposals.
'Strong Treasury dominance'
"At the moment there is a strong Treasury dominance and they're looking at balance of payments issues, whereas the national security committee might have different priorities," Mr Hanson said.
The local rules also enable foreign private companies to invest unfettered in Australia without approval from the regulator, such as for Chinese private firms for up to $1.15 billion in "non-sensitive sectors" and $266 million in "sensitive" sectors under the terms of the 2014 China-Australia Free Trade Agreement (ChAFTA)
The Australian Financial Review revealed last month that FIRB no longer believes private companies in China are free of Communist Party control, a move which has ensured all mainland takeovers are now subject to enhanced screening on national security grounds.
The move is a major departure from the philosophy under which the ChAFTA was negotiated and is in response to the party tightening its grip on the economy and new laws compelling Chinese companies to hand over information to authorities.
The change effectively means all Chinese deals are subject to scrutiny, despite the FTA with Beijing allowing transactions up to $1.15 billion in "non-sensitive sectors" and $266 million in "sensitive" sectors to proceed without approval from the regulator.
The Coalition government last year established the Critical Infrastructure Centre, a unit of the Department of Homeland Affairs designed to provide "clear, consolidated and early" national security advice to inform the Treasurer's national interest decision on foreign investment proposals.
FIRB has expressed more concern about foreign companies acquiring "data-sensitive assets" including in the area of healthcare. China’s Jangho Group in January launched an unsolicited bid to acquire Healius (previously known as Primary Healthcare), a company that holds sensitive medical records on millions of Australians through its 2400 pathology clinics and 70 medical centres.
Treasurer Josh Frydenberg in November stopped the privately owned Hong Kong company Cheung Kong Infrastructure from buying gas distributor APA Group, partly due to concerns Beijing was now exerting greater control over companies in the former British colony.
Then-treasurer Scott Morrison, after considering advice from FIRB, in 2016 blocked on national security grounds CKI and China's State Grid Corporation from buying half of NSW power distributor Ausgrid, reportedly because the electricity infrastructure is critical to support the joint US-Australia military surveillance facilities at Pine Gap, near Alice Springs in the Northern Territory.
Australia's foreign investment regime is broader than other countries.
For example, the US framework deals almost exclusively with national security issues, whereas national security forms only a small share of FIRB's deliberations despite it receiving widespread publicity.
It is understood the dialogue FIRB and Treasury officials have had with foreign counterparts has been a two-way process with other governments also looking to learn from Australia's system.
Treasury, which is usually a strong advocate for foreign investment, favours streamlining foreign investment, such as for complex cases that can sometimes take months and may be a barrier to foreign firms entering the market.
Last year Mr Morrison effectively blocked Chinese telcos Huawei and ZTE from providing equipment to Australia's new 5G mobile phone networks, citing national security concerns.
Huawei's potential involvement
The US government's security agencies in February had raised cyber security concerns with then-prime minister Malcolm Turnbull about Huawei's potential involvement in the high-tech communications infrastructure.
The US Department of Defence has concerns about China's state-backed venture capital funds, masquerading as private firms, buying up early-stage technology companies in Silicon Valley.
"The US does not have a comprehensive policy or the tools to address this massive technology transfer to China," Defence Innovation Unit Experimental (DIUx) said in a report published in early January.
The report said at its peak in 2015 Chinese venture capital firms participated in 16 per cent of all early-stage technology deals.
"The line demarcating products designed for commercial versus military purposes is blurring with these new technologies," the report said.
It advocated tightening up foreign investment laws, greater export controls, curbs on Chinese students and greater counter-intelligence efforts.