China investment to get big boost: June 11, 2008 CHINA'S...

China investment to get big boost: June 11, 2008

CHINA'S investment in Australia -- likely to exceed $30 billion this financial year -- is set to rise even more rapidly.

Treasurer Wayne Swan announced in Beijing yesterday that Australia would become only the sixth approved-investment destination under China's Qualified Domestic Institutional Investor scheme.

Australia joins the US, Japan, Britain, Singapore and Hong Kong in becoming eligible for direct investment from Chinese entities regulated by the China Banking Regulatory Commission, whose chairman, Liu Ming Kang, Mr Swan met yesterday.

The Treasurer said recognition of Australia under the scheme would create new opportunities for Australia's fund managers to provide their services to Chinese investors seeking Australian investment opportunities. "This initiative will also add liquidity to the Australian capital market and open the way for broader investment choices for Chinese investors," he said.

Investment and Financial Services Association chief executive Richard Gilbert said: "This is a landmark announcement for the Australian financial services industry. Australian fund managers are now ideally placed" to help Chinese institutional investors diversify their portfolios.

Chinese funds under management had soared from $US118 billion at the end of 2006 to $US451 billion a year later, and were projected to reach $US720 billion by the end of this year, he said.

Mr Swan told the China-Australia Chamber of Commerce, at a breakfast meeting, that a Chinese investment proposal has been approved every fortnight since the Rudd Government came to office. "Like China, Australia screens foreign investment," he said. "It should be consistent with Australia's aim of maintaining a market-based system in which investment and sales decisions are driven by market forces rather than external strategic or political considerations."

Guidelines he published in February about Australia's foreign investment-screening regime were intended "to provide greater certainty for foreign-government-related entities on how the national interest test is applied".

In China "there is an incredible diversity" in the state sector, from which investment applications would continue to be assessed case by case, he said.

Melbourne-based Robin Chambers, one of Australia's leading legal advisers to Chinese resource investors, told Mr Swan he had waited for 98 days early this year for an answer to an application for a routine variation of an investment by a state-owned enterprise, and after emailing a complaint it was processed 38 minutes later.

It appeared the investment rules were applied inconsistently, Mr Chambers said.

Mr Swan denied this, saying: "One of the reasons we published our guidelines was to give far greater clarity to how we apply the national interest test. It is clear that investments from any foreign government entity fall below the 15 per cent limit."

Every foreign investor seeking more than 15 per cent of an Australian firm needs to apply for Foreign Investment Review Board approval, but state-controlled entities need approval, however small their intended stake.

The Treasurer said the volume of proposed investments from China "has gone through the roof", and because of that, as well as the complexity of some proposals, "processing has taken a little longer, because they need to be examined. But there's no change of approach."

Services and investment were among Australia's priorities for the free-trade agreement negotiations with China, now in their third year, he said.