An interesting article in China Stakes online version.With the...

An interesting article in China Stakes online version.
With the Chinese now bestowing Australia as a foreign investment haven, Shougang may have the green light to go ahead with the Australasian deal.

The second last paragraph has a clue.

http://www.chinastakes.com/story.aspx?id=435

As Money Floods In, China Ask for Openness from Australia.

June 13,2008





by CSC staff


With the release of a list of six principles for the review of foreign investment by the Australian government, and a deadlock in Chinese-Australian iron ore price negotiations, China is increasingly worried that Australia may be following in the footsteps of the US and pursuing a protectionist policy vis-à-vis China.

Australia is trying to allay those concerns. The Australian Treasurer Wayne Swan said China did not need to worry about the six principles. China and Australia will resume negotiations on free trade, which have been ongoing for three years and have yet to yield any outcome. The iron ore price hike to be decided by the Chinese-Australian iron ore negotiation may be as high as 70%.

Swan, who has the last say on the approval of the foreign investment principles, has successively visited the National Development and Reform Commission, the China Banking Regulatory Commission, the People’s Bank of China, and the Ministry of Commerce in Beijing. He also met China’s Vice Premier Li Keqiang.

During the two-hour talk with Swan, Chen Deming, Minister of Commerce asked about the aim of the six principles, and hoped they would not affect Chinese investment in Australia.

China may invest more than A$30 billion ($28.5 billion) in Australia during the 2008 fiscal year。Australia will also get approval under China's qualified domestic institutional investor program. This will allow investment in Australia by entities regulated by the China Banking Regulatory Commission.

The approved-status ``will create new opportunities for Australia's fund management industry to provide their services to Chinese investors seeking Australian investment opportunities,'' Swan said. ``This initiative will also add liquidity to the Australian capital market and open the way for broader investment choices for Chinese investors.''

The approval comes as Chinese investors under the QDII program are being encouraged to tap rising commodities demand. QDII funds have committed about half the money available in Hong Kong to buy stocks abroad.

The Australian government hopes Chinese companies only invest in Australian companies, and do not seek control. “It doesn’t make sense. There’s no such limit in the world. The Australian principles are contrary to those of the WTO,” said Jinxu, Vice Director of the Department of American and Oceanian Affairs with the Ministry of Commerce.

Through “hostile bid”, Sinosteel’s stake in Midwest, an Australian iron ore company has now risen to 40.09%, very close to 50.1%, which would be a controlling stake in the company. Meanwhile, the original validity term for the acquisition has been extended from June 13 to July 18. Due to China’s rapid investment in Australia, the investment applications of several Chinese companies have been delayed. Some of them have been told to withdraw acquisition applications.

Jinxu said that after the three-day meeting with Swan, Australia is unlikely to change these six principles, but may be flexible in some cases such as those of Sinosteel and the Shougang Group.

China and Brazilian iron ore suppliers have agreed to the 65% iron ore price hike, but Australia refused to accept the same price hike and asked for spot transaction.