When Chinalco made a play on the London Stock Exchange in February 2008 for a stake in resource giant Rio Tinto, it generated considerable debate in Australia.
Suddenly the prospect of Chinese state-owned enterprises buying into, or even owning, Australian mineral and resource companies, was causing discomfort. After years of encouraging more foreign investment in Australia, in particular from China, the apparent change in attitude caused ripples of disquiet in China and also Australia.
The Australian government went to great lengths to reassure China that its investments were still very welcome and that it was not being singled out for any special treatment. China’s sensitivities had been aroused when attempts to buy major United States firms Unalco (oil) and 3Com (information technology) were blocked. Suspicions remain that Australia's Foreign Investment Review Board (FIRB) may use the "national interest" test to block future Chinese investments. Several Australian commentators have pointed out that Australia is the only country using such a test – apparently at odds with a truly open, global economy keen to secure international investment.
Until recently, PRC investment in Australia has been relatively low by international standards. Compared to the United States and the United Kingdom, China barely registered. At the end of 2006 Chinese FDI in Australia was approximately $AUD3.4 billion.
But in the last two years the value of new investment approvals increased to some $AUD10 billion - and in a speech to the Central Party School of the Chinese Communist Party in June 2008 Australian Treasurer Wayne Swan said the amount in 2007-8 could reach $AUD 30 billion.
Austrade’s Chief Economist Tim Harcourt says: "Strong outward FDI flows from China are replacing the traditional trade route as a form of global engagement - or more strictly regional engagement within the Asian hemisphere."
Of course all this was before the global economic meltdown and the signs of an economic downturn in China. It will be interesting to see how any future approaches are received by the Australian government. |
