Wandering China

An East/West pulse of China's fourth rise from down under.

Labor’s secret curb on China (Australia) [The Age]

Now that the Chinese are truly released from the confines of the Great Wall, the world has to be ready.

Australia: Protectionist against China, arguably one of the chief lifelines to the Australian economy? The economically synergistic pair is reportedly hitting a roadblock. Perhaps understandably so, despite a federal claim that it has a non-discriminatory foreign investment policy. From the ground, the Chinese presence in acquiring swathes of Australian property and business is not hard to miss. It is not surprising the Aussies feel inclined to take a stand. A clue here from one of its powerful resource producers – ”Australia does not want to become an open pit in the southernmost province of China,” BHP Billiton chief Marius Kloppers.

Australia’s Foreign Investment Review Board provides a glimpse into its role by stating –

The foreign investment policy provides for Government scrutiny of many proposed foreign purchases of Australian businesses and properties. The Government has the power under the Foreign Acquisitions and Takeovers Act 1975 (the Act) to block proposals that are determined to be contrary to the national interest. The Act also provides legislative backing for ensuring compliance with the policy.

More specifically, check out Foreign Acquisitions and Takeovers Act 1975

– – –

Labor’s secret curb on China
Philip Dorling
Source – The Age, published March 3, 2011

CANBERRA’S foreign investment regulator has privately admitted that it is seeking to limit investment from China in response to political concern about the control of Australia’s strategic resources.

Contrary to the federal government’s claims that it supports a non-discriminatory foreign investment policy, the secretive Foreign Investment Review Board has told US diplomats that new guidelines approved by Treasurer Wayne Swan signalled ”a stricter policy aimed squarely at China’s growing influence in Australia’s resources sector”.

The anti-China rationale was set out by Patrick Colmer, Treasury’s foreign investment division head and an executive member of FIRB, in confidential discussions with US embassy officers in late September 2009.

The embassy report of Mr Colmer’s remarks, titled ”New Foreign Investment guidelines target China”, is among embassy cables leaked to WikiLeaks and provided to The Age.

Based on Mr Colmer’s briefing, US diplomats reported that the Australian government privately wished to ”pose new disincentives for larger-scale Chinese investments”.

On August 4, 2009, Mr Swan announced changes to Australia’s foreign investment laws to increase the threshold for mandatory review of proposals – so that private overseas businesses buying a stake greater than 15 per cent in companies valued below $219 million could proceed without review. (With annual indexation, the threshold was raised to $231 million on January 1 this year.)

The new threshold was more than double the old $100 million mark that would trigger FIRB scrutiny and Mr Swan said these measures would ensure the government would not become unnecessarily involved in uncontroversial business transactions.

At the time the Treasurer denied that exclusion of foreign state-owned companies from the new threshold discriminated against future Chinese investment. ”There’s never been a threshold for foreign government or state-owned enterprise investments, so nothing changes there for anybody,” he said.

”It’s not related to any particular country – the rules are the same for everybody – this is a change in the rules for lower-value applications for private business investment.”

Trade Minister Simon Crean also rejected any suggestion that the government was inclined to discriminate against Chinese investment in Australia’s resource sector. ”We run a non-discriminatory policy,” Mr Crean said in a radio interview in October 2009. ”Large investments from whichever source have to meet a national interest test and there has been huge approval of Chinese investment into Australia.”

In private talks with US embassy economic officers, however, the FIRB confirmed the government’s preference for minority foreign shares in new resources projects, with the foreign share of greenfield developments limited to below 50 per cent, and around 15 per cent for major mining companies.

”FIRB general manager Patrick Colmer confirmed … the new guidelines are mainly due to growing concerns about Chinese investments in the strategic resources sector,” the US embassy subsequently reported to Washington.

”According to Colmer, the FIRB has received more than one Chinese investment application every week this year [2009],” the cable says.

”Colmer said the measure is also meant to prevent complex investment schemes, such as proposals with loans that are convertible to equity, which sought to circumvent existing FIRB rules.”

Mr Colmer explained that the new foreign investment thresholds were ”largely meant to reduce the administrative burden on the FIRB”, but emphasised that ”the change excludes state-owned companies from
the higher threshold — virtually all Chinese investment”.

Mr Colmer’s private remarks were made in the aftermath of Chinese state-owned Chinalco’s abortive acquisition of an 18 per cent stake in resources giant Rio Tinto.

They also came after stateowned China Nonferrous Metal Mining Company’s bid, subsequently withdrawn, to acquire a controlling interest in rare earths miner Lynas Corporation, and the government’s rejection on security grounds of plans by the state-owned Wuhan Iron and Steel Group to invest $40 million in a 50-50 joint venture with Western Plains Resources to develop an iron-ore project on the Woomera missile test range.

The US embassy reported to Washington that Labor’s new foreign investment guidelines ”clearly signal a stricter policy aimed squarely at China’s growing influence in Australia’s resources sector, and serves as a warning to potential investors”.

The embassy report of Mr Colmer’s remarks provides the context of his public observations at a conference in Sydney in late September 2009, in which he urged potential investors to consult informally with the FIRB before making formal applications for approval.

”If you talk to us early, before the deals are signed, sealed and delivered between companies, we can point out where there might be concerns,” he told the Australia-China investment forum on September 24, 2009.

The government remains acutely sensitive about any suggestion that it has reservations about Chinese investment.

The Age last month reported private remarks by BHP Billiton chief Marius Kloppers, who was revealed in a diplomatic cable to have told the US consul-general in Melbourne that the government had a ”real fear” that Beijing would win control of Australian resources.

”Australia does not want to become an open pit in the southernmost province of China,” Dr Kloppers said, adding that the government was ”drawing a line in the sand to keep Chinese-state owned firms from owning the larger mining companies such as Rio Tinto, BHP Billiton and Woodside”.

In a speech last Friday, Defence Minister Stephen Smith said ”Australia maintains, as it has for many years, a consistent, open and welcoming stance towards foreign investment wherever it comes from, including from China”.

He noted that since December 2007 about 220 Chinese proposals to invest in Australia had been approved, totalling around $60 billion. Official statistics do not take into account investment proposals that have not proceeded to the point of an application to the FIRB.


Filed under: Australia, Beijing Consensus, Charm Offensive, Chinese Model, Economics, Environment, Finance, Influence, International Relations, Mapping Feelings, Nationalism, Politics, Public Diplomacy, Soft Power, Strategy, The Age, The Chinese Identity, The construction of Chinese and Non-Chinese identities

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