Australia approves Chinese acquisition of mining concern
Updated
The Australian government has given an initial approval to the biggest takeover by a Chinese company even seen in Australia. Coal miner Yanzhou will take over mining concern Felix Resources, in a deal worth more than three billion US dollars.
Australia says it wants to put the issues that have dogged the two countries' relationship behind them, but analysts say questions remain.
Presenter: David Chen
Speakers: Jeff Turner, Austrade official; Julie Novak, research fellow from the Institute of Public Affairs
- Listen:
- Windows Media
CHEN: As the world recovers from the global financial crisis, China's appetite for resources will continue to grow, as will its interest in investing in Australia's mining industry.
Zhou Zhongshu, chairman of China's Minmetals Corporation, says China's 9.7 billion US dollar investment in Australian mining assets is nearly four billion more than China's total investment elsewhere.
Mr Zhou comments, made at an industry association conference and reported by strategic analysis group IHS, came as Don Argus, outgoing chairman of Anglo Australian miner BHP Billiton, gave a rare address to the Melbourne Mining Club.
ARGUS: "Foreign direct investment has been critical and a valued enabler for Australia and the natural resources sector in particular. It is certainly part of the solution for the foreseeable future, but we must ask ourselves, what economic rent do we charge for access to our endowment assets?. How do we encourage ongoing local investor participation to these future growth opportunities? Are we heading for a Canadian experience, where local shareholders lose opportunities to invest in the development of a country's endowment assets? Big question."
CHEN: Mr Argus warned that if Australia didn't work out how to fund investment in resources then it would miss out to foreign rivals.
But, he says, that doesn't mean he's against Chinese investment.
ARGUS: "I was merely saying that we can't get complacent from a competitive point of view because we've had a good run with China. With China now going out and branching out and trying to lock in resources themselves, and that creates true competition, there's nothing wrong with true competition. Maybe the commodities will be priced properly then."
CHEN: Nevertheless, caution towards Chinese investment into Australia is a sentiment that's echoed in the Australian public.
A recent survey, by the Lowy Institute found 50 per cent said the government was approving too much investment from China, with 42 per cent saying approvals were about right.
This sentiment is something the federal government is paying attention to, according to Julie Novak, research fellow at the Institute of Public Affairs, a free market think tank.
NOVAK: Governments do typically respond to the economic views of the average voter and in accordance with that, the federal government, last year introduced a range of principles which ought to apply to specific investment in this country.
But Ms Novak says potential foreign investors have complained about the vagueness of the guidelines.
She says Australia should open the country further to foreign investment.
NOVAK: What we could do is increase the assets and monetary thresholds, that apply to investments not from the United States, to match those to those that apply in America, so therefore the freetrade agreement standards that apply to the US, apply to investors from all countries so we basically make our investment stands fair and impartial to all countries.
CHEN: More foreign investment is something Jeff Turner, a senior Austrade official in China, has been encouraging at a conference in China's eastcoast city of Tianjin.
He says he received enthusiastic responses from Chinese mining companies, as well as some probing questions.
TURNER: There were questions about environmental approvals in Australia, China investors were coming out about indigenous and heritage land approvals and about Chinese workers coming in. There were also, of course, a couple of questions about how welcoming the Australian foreign investment regime is."
CHEN:Mr Turner says while Chinese concerns about investing into Australia won't disappear, the Australian government will continue to listen.
TURNER:We won't put them completely to rest, but at least we're keeping the dialogue going, and you can see some of the interest. One thing, when they ask the question, does Australia really welcome Chinese interest? The way we were answering it was basically this: two years ago, the stock of Chinese investment was about three billion dollars. Two years later, the stock is about 30 billion dollars. . So we say it's rising really rapidly, which is great to see - the Australian government welcomes it, but we do like every other country have to keep out national interest at heart.
CHEN: With the Foreign Investment Review Board rejecting several Chinese bids earlier this year, the Australian government's perception of the national interest will probably play a part in tensions between the two countries. The arrest and detention of Australian citizen and Rio Tinto executive Stern Hu by chinese authorities, remains a sore point. But as Austrade official Jeff Turner points out, bilateral relations are rarely smooth.
TURNER:What they're saying is that, yes, there's a few issues in the relationship between China and Australia, at the moment, but in such a huge trade and investment relationship, these are to be expected.
