China-Australia investment ties seen improving in 2010

China-Australia investment ties seen improving in 2010

Reuters

6 January 2010

SYDNEY - Australia and China showed a united front in a bid to improve investment ties as they signed a $3-billion coal deal on Wednesday, following a rocky year in which Australia blocked a series of Chinese takeovers.

The purchase of Australia's Felix Resources by Yanzhou Coal Mining could open the door to more acquisitions, said Australia's Resource Minister and China's ambassador.

"Yanzhou's successful takeover marks a new start in cooperation between Australia and China," said China's ambassador to Australia, Zhang Junsai.

"China brings not only capabilities, jobs and opportunities, but also secure long-term market share," Zhang said.

The buyout was the biggest by a Chinese firm in Australian mining history and among the top ten mergers and acquisition in Australia in 2009.

Bilateral and investment ties were hurt last year when Chinese companies were prevented from taking over Australian businesses, and by the Chinese detention of an executive from Australian mining firm Rio Tinto on commercial espionage charges.

The resources sector is Australia's biggest export-earner and Australian miners regularly court Chinese funding, to partner up with the world's fastest growing economy, only to be overruled by Australia's tough Foreign Investment Review Board (FIRB).

Australia in 2009 revealed new investment guidelines biased against majority foreign stakes in its mining industry, raising concerns in Beijing of an anti-foreign investment bias.

Up to 10% of investment applications before FIRB are withdrawn even before the board makes a ruling.

The Australian government, led by Mandarin-speaking Prime Minister Kevin Rudd, has consistently said it welcomes offshore investment as long as it is in the national interest.

"We're learning from the past that more and more potential investors are approaching the Foreign Investment Review Board prior to making their final decisions, in some ways testing the ground, assessing what potential conditions might be required," said Australian Resources Minister Martin Ferguson.

"That's a statement of the maturity of the investment relationship between Australia and China," he said.

Ferguson also said China helped Australia avoid the worst of the global financial crisis by keeping up orders for raw materials and enabling Australia to avoid recession.

"People shouldn't forget that Australia is built on the back of foreign investment," he said.

Ferguson said Australia would continue to weigh foreign acquisition applications on individual merits, though his comments and those by the Chinese ambassador showed a potential softening in how Australia viewed buyers from communist China.

Yanzhou's vice chairman, Geng Jiahuai, also said the Felix coal deal would act as a "platform for growth" in Australia for Chinese firms.

Rio executive Stern Hu's detention last year created a diplomatic crisis and Ferguson again called for a speedy trial. "I hope that it is drawing to a fast conclusion from the point of view of our relationship with China," he said.