China scores major Australian mining deal
Updated
China has secured the first of several major bids to invest in Australian mining firms. The Australian treasurer has given the go-ahead for Hunan Valin Iron and Steel Group to buy up to 17.5 per cent of the Fortescue Metals Group. The deal comes amid a politically charged atmosphere in Australia with some saying the Rudd government's ties with China are too close.
Presenter: Linda Mottram, Canberra correspondent
Speaker: Simon Crean, Australian trade minister; Mark Thirlwell, director, international economy programme, Lowy Institute for International Policy, Sydney
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MOTTRAM: In recent months, three major Chinese bids have been made for Australian commodities companies, as China has gone on a bargain hunt to secure future supplies of vital raw materials and Australian firms, hit by the global financial meltdown, searched for cash in a credit strapped world. It was the start of what Australia's trade minister Simon Crean is calling a new paradigm in the Australia-China relationship.
CREAN: We think that the nature of the economic relationship is increasingly going to create this issue of investment demands country-to-country. We need to develop a better framework for accommodating that and that can usefully be done if we are of a mind to do it through the FTA.
MOTTRAM: And the FTA - the proposed Free Trade Agreement between Australia and China that's been limping along at best for four years - was what took Mr Crean to China this week, in a bid to give new political impetus to a process Mr Crean himself had previously described as being bogged down.
The mood was not overly optimistic ahead of Mr Crean's various talks, including four hours with China's Commerce Minister, Chen Deming. Officials will meet again in Beijing next month. And Mr Crean said his Chinese interlocutors understood Australia's determination to include in the FTA deals on the very sensitive areas of agriculture and investment, among others. But it was as though the minister was still having to convince Beijing of Australia's case.
Mark Thirlwell is director of the international economy programme at the Lowy Institute for International Policy in Sydney.
THIRLWELL: There are a couple of problems here. One problem is sort of a different view on how you treat FTAs. A number of our partners in the region tend to view them more as sort of broad, diplomatic and strategic tools, so for them a lot of this is about symbolism and they're sort of reluctant sometimes to push ahead with some of the sort of the tougher parts of the trade agenda. We've seen that in the previous negotiations and we're seeing it again now. So that's one problem. The second problem is just that the Chinese were always going to be very tough negotiators.
MOTTRAM: And Australia may not get what it wants first time around, which carries the risk that it'll end up with a lame deal that never covers the areas Canberra considers vital.
But the added stress on the process is the Australian political context. And China's multi billion dollar bids for Australian mining companies are part of that.
Mark Thirlwell again.
THIRLWELL: One of the political arguments that's being advanced here in Australia about our response to Chinese foreign investment is Well, it needs to be fair, we need to be able to invest in China on the same terms that China can invest here. And that obviously has implications for the FTA negotiations. The way that issue is currently playing in Australia it's becoming increasingly politically sensitive. It is sort of morphing into a broader discussion about the nature of the bilateral relationship.
MOTTRAM: And from China's perspective, Chen Deming sought assurances from Simon Crean that there was no linkage between approvals for Chinese investment proposals and concluding a free trade deal. Mr Crean gave that assurance.
Still, the debate in Australia about whether the Rudd government is too close to China has a way to run.
With its decision late last week to initially reject China's Minmetals bid for Australia's OZ Minerals on national security grounds, the government was able to score a point against those pushing the 'too close to China' argument.
Now Canberra has approved the Hunan Valin Iron and Steel Group's bid to take a 17.5 per cent shareholding in Fortescue Metals Group, subject to strict undertakings on board members and influence over sensitive matters, like prices. Still outstanding is a revised Minmetals bid. And the big one, Chinalco's US$19.5 billion bid for a stake in struggling miner Rio Tinto. Australia's government will continue to stress the absolute independence of the foreign investment review process and Simon Crean says minister Chen Deming, for one, has accepted Australia's right to make investment decisions based on its national interest.
