The advice is based on an assessment that the Coalition government is now more eager than ever to show it is pro-foreign investment.

Citing unspecified national security grounds, Treasurer Scott Morrison last week rejected separate proposals by Hong Kong-based infrastructure giant Cheung Kong Infrastructure Holdings and the Chinese state-owned enterprise, State Grid for a 50.4 per cent stake in the NSW electricity distributor, Ausgrid.

Mr Morrison's decision was based on unanimous advice from the Foreign Investment Review Board and came despite the fact that both Chinese entities already have extensive energy distribution holdings in Australia.

State Grid had been approved to bid for another large slice of the NSW electricity network (TransGrid) as recently as December last year.

A source close to the State Grid proposal said it was blind-sided by Mr Morrison after complying with the bid specifications.

Australia-based Chinese advisers were now warning Beijing that frequent changes of government, political leadership instability, a lack of certainty about the Turnbull government's longevity, and the fickle application of non-transparent foreign investment rules, were frightening investors away with other countries becoming more attractive.

The source said some, however, were trying to "calm the waters" in the wake of growing sovereign risk concerns and were telling their cashed-up Chinese clients that Ausgrid's refusal may actually improve the prospects of other bids.

"The smarter readers of Australian politics will recognise the opportunity - that Scott Morrison will not want to be seen rejecting any other Chinese bids for foreign investment in the near future," the source said.

"The last thing he'll want is to be painted as anti-Chinese investment and the quickest way to turn that around that is to wave through other Chinese acquisitions."

"If I was a Chinese company with money to invest right now, I'd be looking for more Australian opportunities, not less, after Ausgrid."

But for all the criticism of the Treasurer's intervention in the Ausgrid sale - repeated again on Tuesday by Australia's former foreign minister Gareth Evans - there were also criticisms of State Grid's approach after it declined to take advantage of an earlier "first blush" service provided by the Foreign Investment Review Board.

Its campaign proceeded all the way towards the end before finding its proposal was not acceptable to Canberra on grounds that were essentially non-commercial.

The mega-company's TransGrid joint venture with Macquarie Bank had fallen short after the bank decided its debt-to-equity ratio from the deal would be taken beyond what it was comfortable with.

In its Ausgrid bid, the colossal State Grid company, which is so big it has nearly 2 million employees, had decided to go it alone and believed it had appropriately met the form and specifications of the Australian government.

However, there have been some grumblings that it was too confident after its previous TransGrid approval, and that its management was obsessed with the politics of Australian media coverage, rather than becoming cognisant of the rising populist pressures on the Treasurer.

These pressures include the Nationals, the re-emergence of Pauline Hanson's One Nation party, the gains of the Nick Xenophon Team, and the election of other protectionist cross-benchers.

The issue of foreign investment, particularly Chinese ownership of critical infrastructure, and the acquisition of agricultural land after the S Kidman sale was also blocked, will be among several tensions in the Canberra-Beijing relationship when Prime Minister Malcolm Turnbull attends the G20 meeting in China in coming weeks.

Also certain to be mentioned on the sidelines of that meeting and the subsequent East Asia Summit, is Beijing's expansionary policy in the South China Sea.

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