Treasurer slams gate on Chinese raidsFont Size: Decrease...

Treasurer slams gate on Chinese raidsFont Size: Decrease Increase Print Page: Print Jennifer Hewett, National affairs correspondent | July 05, 2008
THE Rudd Government has finally revealed that it will impose limits on Chinese takeovers of Australian mining companies as it grapples with a $30 billion wave of Chinese foreign investment proposals.

In a move that threatens to aggravate tensions with Beijing, Treasurer Wayne Swan said he would "more carefully" examine proposed takeovers of Australian resource companies by foreign companies that were buyers of Australian iron ore, coal and other resources, or were state-owned.

He called this policy "open, in the national interest".

"Our predisposition is to more carefully consider proposals by consumers to control existing producing firms," Mr Swan said in a major speech on foreign investment.

"We usually welcome and encourage some participation by the buyer, because that offers the buyer some security of supply and the seller some stability in the market.

"But we need to ensure that investment is consistent with Australia's aim of ensuring that decisions continue to be driven by commercial considerations and that Australia remains a reliable supplier in the future to all current and potential trading partners."

Although the Treasurer repeated that Australia had a non-discriminatory investment policy, his statements are aimed directly at the wave of Chinese foreign investment applications that has grown to $30 billion since the federal election in November last year -- up from less than $10billion in the two previous financial years.

The new wave includes bids by Chinese steelmakers aiming to secure access to Australian iron ore and coal.

"In particular, Australian governments -- now, as in the past -- are particularly attentive when the proposed investor in an Australian resource is also the buyer of that resource or linked with the buyer of that resource," Mr Swan said in an address to the Australia China Business Council in Melbourne.

"But it follows that as the proposed participation by a consumer of the resource increases to the point of control over pricing and production, and especially where the resource in question is already developed and forms a major part of the total resource, or where the market disciplines applying to public companies are absent, I will look more carefully at whether the proposal is in the national interest."

Chinese state-owned companies are stalking mid-sized iron ore miners in Western Australia, including the $1.5 billion Midwest, while in February the Chinese aluminium giant Chinalco led a share market raid that snared a 9 per cent stake in iron ore giant Rio Tinto -- a raid that has yet to be approved under Australia's foreign investment rules.

Last week The Australian revealed that the Government had officially prohibited for 90 days any move by China's state-owned Sinosteel to acquire "a substantial shareholding" of the $1.5 billion Murchison Metals.

The Chinese have expressed confusion about the rules, given the wide discretion that the current foreign investment guidelines provide to the Treasurer, who can overrule bids on national interest grounds.

The Chinese ambassador to Australia, Zhang Junsai, added to the tension this week when he told The Australian that Chinese firms were "puzzled" by official delays in approvals.

He said the Australian Government should encourage "an attitude of welcome" to Chinese companies.

Mr Swan's comments yesterday galvanised the investment conference which had been told that the Rudd Government's restrictions on foreign investment were being applied too aggressively and in a way that was confusing to investors.

One of the key speakers revealed that the Government had recently asked a Chinese company to limit itself to 49.9 per cent of a target company as a pre-condition for granting its approval of a foreign investment proposal.

Robin Chambers, senior partner with Chambers Lawyers and the only non-Chinese director of Sinosteel Australia, told The Australian that the Chinese company had rejected the Government's request and its application was now on hold.

This previously unreported incident with an unnamed Chinese company (not Sinosteel) and an Australian target company reflects the increasing tension and uncertainty about what investments will be allowed.

The Australian also reported last week that the Government was understood to be preparing a new foreign investment regime with a likely ownership ceiling of 49.9 per cent.

Mr Swan yesterday refused to be drawn on shareholding limits to what he said was a case-by-case approach.

But he insisted that Australia's national interest lay in having a competitive market, and it was not just an issue of preventing transfer pricing through the strict application of Australian laws.

"The question here is, is it in Australia's national interest for a buyer of our resources to control our resource-producing companies?" he said.

Mr Swan rejected the criticism that the Government was taking too long to decide on applications to the Foreign Investment Review Board, saying he had approved on average one Chinese investment proposal every nine days since coming into office.

His comments suggest that Canberra will be more relaxed about Chinese investors taking a minority stake in existing companies and may also permit full takeovers of companies where the resource is not yet developed.

But, answering questions, Mr Swan also expressed concern over concentration of ownership in any one region or industry,

That would be relevant to the mid-sized iron ore companies of the new iron ore frontier in Western Australia's Mid West.


the most important fact is that that Chambers Lawyers did the AXO off take agreements, could the deal in question be SinoSteel trying to get hold of AXO?