"You have rich resources; we have a lot of money," says the head of a Chinese investment bank to an audience of Aussie execs, explaining the attraction the 2 countries have for each other. Beijing plans on investing 1/3 of its $3T reserve stockpile outside China in the next 5-10 years.
China plans to invest $US1 trillion overseas, including Australia MATT CHAMBERS From: The Australian July 13, 2011 12:00AM
CHINA is planning to invest $US1 trillion ($944 billion) of its massive cash reserves overseas in the next five to 10 years, with its eye firmly on Australia as it looks for greater security of investment.
CHINA is planning to invest $US1 trillion ($944 billion) of its massive cash reserves overseas in the next five to 10 years, with its eye firmly on Australia as it looks for greater security of investment.
But while the majority of the investments would be focused on resources, high-level Chinese banking executives speaking at the Boao resources forum in Perth said yesterday Australia still needed a clearer path for Chinese investment and that Chinalco's failed $US19.5bn deal with Rio Tinto in 2009 was still fresh in Chinese minds.
Nomura China chairman and chief executive Yang Zhizhong told the conference that China's outbound investment had more than doubled from $US30bn in 2007 to $US70bn last year and was expected to keep accelerating.
"I believe China's outbound investment will accelerate at speed but no one knows (how fast)," Mr Yang said.
"China has a foreign exchange reserve of $US3 trillion and it is not surprising to think $US1 trillion will be employed in assets outside of China within the next five to 10 years.
"Australia is, if not the most, one of the most attractive destinations," he said, adding that most of the investment would be oil and gas, mining commodities and agriculture.
Australia's abundant resources, stable political and investment environment and closeness to China were all looked at favourably, he said.
Li Jiange, chairman of one of China's biggest investment banks, China International Capital Corp, said the Asian powerhouse was keen to improve the security of its resources. "China has bought a lot of debt from other countries that are likely to go into default in some cases; we need to find places with a higher degree of security," Mr Li said through a translator.
"We are looking at allocating a large number of resources to Australia. You have rich resources; we have a lot of money."
Despite the bonhomie at the conference, both bankers made it clear that applications of Australia's foreign investment laws and pronouncements by politicians worried Chinese investors.
During the global financial crisis, and subsequent onslaught of resource takeover attempts from a cashed-up China, Australia's Foreign Investment Review Board issued guidelines that foreign investment should be limited to 15 per cent of big resources companies and to 50 per cent of undeveloped projects.
In March of this year, WikiLeaks documents reportedly showed Australia had revised its investment laws to create disincentives for big Chinese investments.
At the conference, Mr Yang attacked comments he attributed to West Australian Premier Colin Barnett that Asian investors should take small and stable stakes in Australian resources.
"That to me is a little bit narrow-minded," said Mr Yang, who was an adviser on the failed Rio-Chinalco deal. "I think the government should let the market work out what would be the most mutually beneficial and strategic transaction structure."
Speaking after the discussion panel, Mr Yang told The Australian that Chinese investors still felt there were a lot of difficulties investing in Australia and it was not clear how to progress deals.
But he said investors did not have major concerns about sovereign risk spurred by mining or carbon taxes.
Mr Li agreed on the difficulties here. He said that while Australia was attractive, investment locations such as Africa and South America beckoned.
"We need a clearer framework; Chinese investors do not need to go to Australia," Mr Li said.
"We need a better understanding of each other."
The 2009 Rio-Chinalco deal would have allowed Chinalco to double its stake in Rio to 18 per cent and take a stake of up to 50 per cent in some of Rio's best Australian resources assets. FIRB and the Rudd government were spared making a decision on it when Rio's then new chairman, Jan du Plessis, killed the deal because of a lack of shareholder support.
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