Under Australia’s foreign investment review framework all foreign governments and their related entities should notify the federal government and gain approval before making a direct investment in Australia regardless of the value of that investment. Yet can Australia’s current policy settings be maintained in their current form given developments in global capital markets, in particular the rise of state capitalism. This paper sets out the Australian foreign investment legal and policy framework. It focuses closely on the national interest test and the manner in which it has been applied, with particular reference to the rising importance of China as a major trading partner. Focusing on empirical evidence of government decision-making under the Foreign Acquisitions and Takeover Act 1975 (Cth) and supporting policy documents, this paper makes recommendations for reform in three areas: (1) the national interest test and public opinion; (2) enhancing transparency and consistency; and (3) non-discrimination.