Australia's concern in foreign ownership
SNOWDON: Sovereign wealth funds are not new but their size is. Several trillion dollars worth of government owned surpluses looking for a home has raised questions of transparency and political intentions. Mark Thirlwell, the Director of the International Economy Program at the Lowy Institute in Sydney.

THIRLWELL: They're basically vehicles for government investment. I think what's really brought them to prominence is this dramatic thing we've seen in the aftermath of the sub prime crisis. What we used to think about international financial crises, where they happened in developing countries, in effect we're seeing developing country taxpayers bailing out rich country financial systems. It's very different from what we've seen in the past.

SNOWDON: US banks battered by losses from the sub prime mortgage crisis have welcomed sovereign funds riding to the rescue. Reportedly as much as $US46 billion has been poured into giants like Citigroup, Merrill Lynch, Morgan Stanley and others from Kuwait, Saudi Arabia, Abu Dhabi, China, South Korea and Singapore. Other targets include British football clubs and in Australia, the Singapore government's Temasek Holdings bought a 14 per cent stake in a debt burdened child care centre business, ABC learning. Then last month, the state-backed Chinese aluminium company Chinalco swooped on British-Australian miner, Rio Tinto.

Chinalco's President Xiao Yaqing flew to Australia to reassure investors and the government that Beijing's hand was not behind the purchase of 12 per cent of Rio to block a takeover attempt by BHP Billiton.

XIAO: While to precisely describe our relationship with the Chinese government, basically the government tells us and all the other Chinese companies that you make your commercial decisions, you enjoy autonomy in making those decisions based on market principles, but you have to - wherever you invest, wherever you have your corporate activities - you have to abide by the rules and regulations of the local community.

SNOWDON: Those rules just got tougher in Australia which has become one of the few nations to create additional national interest criteria specifically for sovereign funds looking to invest in Australian companies.

Prime Minister Kevin Rudd at a press conference last month.

RUDD: The problem we have, whether it's with China or other sovereign wealth funds for example, whether they come from Singapore or the United Arab Emirates, or other State-owned enterprises from around the world, is that it's not a case of one size fits all. You can't make a broad generalisation.

SNOWDON: It means approvals will be determined on a case-by-case basis, and include an assessment of the degree of government control.

Australian-Chinese corporate lawyer, Thomas Chiu, believes Chinese firms are interested in good returns and learning first hand about western-style capitalism, and less in some form of takeover.

CHIU: I don't think that's the Chinese way, let's wait and see. And people try to compare China today with Japan 20 years ago, and they say they're similar, and eventually we haven't seen the Japanese taking over America. Remember when the Japanese bought the Rockefeller Centre, and a lot of business in the Gold Coast? I mean where are these Japanese investments? So the Chinese have been very cautious about overspending, and modesty is the philosophical belief among the Chinese business people, I mean most of them.

SNOWDON: Others think there's more to it. In the United States, a rise of nationalism and protectionism means questions are being asked about the influence of foreign financing.

Treasury Secretary Henry Paulson responded to concerns raised in a recent Congressional Committee

PAULSON: So I think the real question we're getting at is are the investments coming in to our country driven by market forces or are they being driven by political forces. So there is a concern in our country that I think has been for a long time somewhat unfounded, and there is a concern in many other countries that will try to hold back foreign investment.

SNOWDON: While there's no clear strategy from the Bush administration, and the extra money is welcome, corporate regulators are under pressure to at least be vigilant.

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