the australian

CNMC in N Korea, BurmaFont Size: Decrease Increase Print Page: Print Michael Sainsbury, China correspondent | May 04, 2009
Article from: The Australian
AS if the brouhaha over Australia's relationship with China was not enough already, Kevin Rudd is about to face a fresh set of challenges regarding our most important trading partner.

The Prime Minister is struggling to outline a cohesive all-of-government strategy that honestly outlines what his government thinks about China's money, government and military build-up and how that fits in with Australia's future.

There is clearly a case to be made: just because we think China's strategies and motives are opaque, doesn't mean that we can't be clear, thoughtful and considered. It's called leadership.

It should take into account the medium to long-term economic security of Australia -- not short term, political considerations.

But developments on Friday only made things harder.

The latest, very thorny issue concerns the state-owned Chinese company that lobbed a $500 million rescue bid for West Australian miner Lynas on Friday. China NonFerrous Metal Mining Group, which wants to put its foot on deposits of the rare earths that are used in all sorts of hi-tech products, has some very interesting relationships with the pariah states of Asia. CNMC has investments in Burma and North Korea as part of its decade-long strategy of developing resources offshore.

Lynas, which has been forced to suspend its West Australian operations because of the global financial crisis, would be CNMC's second major Australian investment. The deal with CNMC will give the company $US366 million ($500 million) in cash and loans, including $252 million for 700 million Lynas shares at 36 cents a share, giving the Chinese a 51 per cent hold on the miner.

It looks like a no-brainer. No Woomera or Pine Gap to trouble the spooks.

But Rudd will have to ask himself, and his colleagues, whether Australia wants to do business with such a company.

Earlier this week, CNMC signed a deal to tip $US800 million into an iron ore and nickel mine in the north of Burma, which the junta has renamed Myanmar. The Chinese company already has a $US500 million nickel mine in the impoverished nation. These are massive investments that feed the coffers of Burma's regime. They are two of the biggest mines in Burma.

So Lynas would become part of a group that makes hay in Burma. Can the Government live with that? What are the rules about ethical investments?

CNMC's mining operations in Burma are just a part of China's concerted effort to lock down its southern neighbours' resources -- and supply lines to the Bay of Bengal -- as part of its resource and food security plan. That's understandable -- but at what cost to the Burmese people?

Burma is a sad country. It was once Asia' rice bowl and the jewel in the British colonial crown, but almost 40 years of rule by the junta has gutted a proud nation.

There is little infrastructure to speak off. Electricity and telephones are scarce. The main road between its two biggest cities, Rangoon and Mandalay, is barely a goat track.

Tens of millions of Burmese have only just enough to live on.

Yet Burma is one of Southeast Asian's treasure troves. Rather than Burma's people benefiting, the winners are the military elite, the Chinese, South Koreans, Japanese and the Indians.

CNMC already has a foot in the door in Australia after obtaining assets through its 2006 purchase of a majority share in West Australian miner Ord River Resources, where CNMC chairman Tao Lun is deputy chairman and the group holds another board seat. It also holds mining assets through licences in Zambia, Mongolia, Thailand, Laos, Cambodia and The Philippines.

Like Chinalco and about 168 other large companies, CNMC is controlled by China's powerful Assets Supervision and Administration Commission (SASAC).

Chinalco also has operations in Burma. Yet the issue has barely raised its head. Do Rudd and Wayne Swan even know about this? And what do they think?

CNMC is also developing three gold mines in North Korea, which this week threatened to conduct another nuclear test in direct defiance of the international community's wishes. Even the Chinese are not happy with their northern cousins, yet business, it seems, is business.

If the latest deal passes Australian and Chinese regulatory approvals, the Chinese will guarantee a Chinese bank loan of $US104 million to Lynas and a second loan of about $US80 million.

The latest Chinese play will force Swan to make another decision on one of China's largest state-owned enterprises, which like many of its other large siblings, is attempting to move away from its narrow resource focus to become a broad-based mining company.

Many Chinese groups see themselves in the mould of offshore multinationals like BHP, Rio Tinto and Brazil's Vale.

China's state-owned miners are running a risk by exploiting the natural assets of repressed peoples.

As governments around the world try and recast capitalism as a kinder, gentler force that benefits more people at the expense of fewer, such issues are certainly ripe for debate.

As a country that has time and again condemned the Burmese regime and its treatment of its Nobel Laureate Aung Sun Su Kyi, Australia has let the world know where it stands on the regime. This is an issue that is not going to go away. Closing our eyes won't work.