article in smh today

Trade should flow two ways, says China.
Clancy Yeates
May 20, 2009
CHINA'S ambassador to Australia has defended the controversial wave of foreign investment by state-owned enterprises, saying the proposed deals were relatively small beer compared with other countries' holdings and the burgeoning trade relationship.

As the Foreign Investment Review Board pores over Rio Tinto's proposal to sell a 9.3 per cent stake to Chinalco, owned by the Chinese Government, ambassador Zhang Junsai said yesterday that Chinese investment accounted for only 1 per cent of foreign investment in Australia.

By comparison, China bought more than 15 per cent of all Australian exports in the year to February, worth $35 billion. "One-way investment is not healthy. There should be two-way investment," he told the China-Australia Business Congress in Sydney. Mr Zhang said that in the past two decades 4000 Australian companies had profited handsomely from investments in China.

"Twenty years later, some Chinese companies come to Australia to invest … I think they should be welcome," he said.

Mr Zhang played down the importance of recent investments by Chinese Government-owned enterprises that the Government has already approved. Hunan Valin bought 17 per cent in Fortescue Metals Group, he said, while Minmetals' planned takeover of OZ Minerals was a different story because OZ had gone bankrupt.

He would not be drawn on the consequences of any rejection of the Rio proposal but denied the Government's review of Chinalco's plans to buy into Rio Tinto was damaging economic relations.

"With such a big investment, the Government of Australia needs to take time to look at it. It's quite natural," he said.

The comments come amid growing hopes that a revival in Chinese growth and demand for commodities could help to limit the impact of worldwide recession on Australia. China's economy grew 6.1 per cent in the first quarter - regarded as slow by its standards - as exports slumped. But a $900 billion government stimulus package is now supporting infrastructure investment, which lifts Australian exports of energy and raw materials.

The governor of the Reserve Bank, Glenn Stevens, yesterday said recent Chinese data showed an indisputable lift but how long it would last was open to question.

Mr Zhang said that 30 years after China embraced free-market capitalism, it was natural state-owned enterprises were investing abroad.

And besides the resources boom Mr Zhang said Australia had received a windfall from an influx of fee-paying Chinese students