Australia welcomes China investment boom, urges cooperation

TRADE WARS

China sovereign fund boosts resource interests: analysts
China's 200-billion-dollar sovereign wealth fund is pouring money into resources firms to quench the Asian giant's thirst for raw materials and diversify its investments, analysts said Thursday. In the past three months alone, China Investment Corp (CIC) has invested more than four billion dollars in companies in Canada, Indonesia and Hong Kong with interests in coal, copper and iron ore. After seeing its investments in US bank Morgan Stanley and private-equity firm Blackstone Group crushed by the global crisis, the fund is pumping up its exposure to resources companies, the analysts said. "They have learned a big lesson from the global downturn so that's why their investment strategy is different from two years ago," Sherman Chan, an Australia-based analyst for Moody's Economy.com, told AFP.

"Investing in resources helps diversify their portfolio and it will benefit the country in the long run." CIC was set up in 2007 to help China find more lucrative ways to invest its massive foreign exchange reserves, which stood at 2.13 trillion dollars at the end of June and are parked mainly in low-yielding instruments such as US Treasury bonds. In two of its most high-profile investments, CIC pumped five billion dollars in Morgan Stanley in December 2007 and also owns more than 10 percent of Blackstone. But the financial crisis drove down the value of those investments, and in its first annual report released last month, the company said it lost 6.7 billion dollars in its global portfolio last year.

"CIC was burned by the volatility in the financial sector last year and I think there's pressure for CIC to shift itself to longer-term initiatives which will help China's strategic growth in the long term," Ren Xianfang, a Beijing-based analyst with Global Insight, told AFP. CIC agreed Wednesday to a 1.9-billion-dollar investment in Indonesia's PT Bumi Resources Tbk, the country's largest producer of thermal coal. Also this week, the fund agreed to take a 15 percent stake in Hong Kong-based commodities trader Noble Group for 850 million dollars.

Together with its 1.5 billion dollar investment in Canadian diversified miner Teck Resources in July, CIC has spent 4.25 billion dollars in three months. The fund is also in talks to set up a joint venture worth billions of yuan with Baogang Group of Inner Mongolia, which holds 87 percent of China's rare earth reserves, Chinese state media reported Thursday. Royal Bank of Scotland strategist Brian Jackson said CIC's investments in resources companies were "consistent with the idea that they are worried about their exposure to US financial assets". "They want to increase their exposure in the resources sector as part of China's overall strategy to diversify its wealth," Jackson said.

by Staff Writers
Sydney (AFP) Sept 24, 2009
Australia welcomed booming Chinese investment Thursday and said it expected further growth despite recent tensions over a detained mining executive and the visit of an exiled dissident.

Patrick Colmer, head of Australia's Foreign Investments Review Board (FIRB), said China was Australia's third-largest investor last year, behind the United States and Britain, and was "probably going to go higher than that in future."

However, he urged Chinese businesses to cooperate more closely with regulators and adopt a less heavy-handed approach when seeking acquisitions.

"We do welcome Chinese investment. The government is keen to see that continue," Colmer told a China-Australia investment forum in Sydney.

"The government is also keen to maintain Australia's national interest."

Colmer said Australia was looking for "true commercially focused" deals and was more comfortable with investments below 50 percent for new ventures and less than 15 percent for major producers.

It also preferred early engagement on significant projects, and as cooperative an approach as possible, he said.

"Talk with us early... and deal with us the way we like to deal with you, which is in confidence," he said.

His comments came as a new report showed a surge in Asian investment last year.

According to analysis carried out for the Financial Review newspaper, Asian investment in commodities-rich Australia surged almost 40 percent to 17.5 billion US dollars in the year to June, led by Chinese mining acquisitions.

Japan led the race in value terms, but China accounted for 49 of the 153 deals involving Asian investors, and spent double what it did the previous year, forking out 6.78 billion US.

Fast-industrialising China has maintained a big appetite for Australian resources despite the global downturn, most notably its unsuccessful bid for a 19.5 billion US dollar tie-up with mining giant Rio Tinto.

The snubbing of Chinalco's bid came weeks before Rio executive Stern Hu was detained in Shanghai for alleged spying, later downgraded to industrial espionage.

Australia then sparred with China over its decision to let exiled Uighur leader Rebiya Kadeer visit last month.

A number of Chinese bids are currently before the FIRB, including a 2.8 billion US dollar offer from Yanzhou Coal for Felix Resources, which would be the largest ever takeover of an Australian company by a Chinese state-run firm.

However such bids face challenges, as illustrated when Australia's military this week rejected a proposal from Chinese steelmaker Wuhan Iron and Steel Co. (WISCO) to gain access to a mining project on the sensitive Woomera weapons testing range.

Defence Minister John Faulkner said the department objected on national security grounds to WISCO taking a 50 percent stake in Western Plains Resources' Hawks Nest magnetite iron ore project.

The "inherently dangerous and very sensitive" Woomera test range "is a significant contributor to Australia's defence capability and that of our allies," he told state radio.

Western Plains said China's National Development Reform Commission had on Thursday cleared the Hawks Nest joint venture with WISCO, which it called a "major component of the outstanding conditions."

Treasurer Wayne Swan will give his final ruling following advice from the FIRB. He knocked back a similar bid by China's Minmetals for OZ Minerals in March because its flagship Prominent Hill project was in the Woomera zone.

Share This Article With Planet Earth

del.icio.us Digg Reddit

YahooMyWeb Google Facebook

Related Links
Global Trade News

Memory Foam Mattress Review

SPACE MEDIA NETWORK PROMOTIONS
Solar Energy Solutions
Tempur-Pedic Mattress Comparison ...

Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News

TRADE WARS

Canada, Norway, Russia to provide Arctic sea weather warnings
Geneva (AFP) Sept 23, 2009
Canada, Norway and Russia will soon provide navigation and meteorological warnings for ships crossing the Arctic sea, a new maritime route which has opened up due to global warming, a WMO expert said Wednesday. A revised Manual on Maritime Safety Information which is to come into force in 2011 now includes the Arctic as a new zone, divided into five areas where weather warnings would have to ... read more

The content herein, unless otherwise known to be public domain, are Copyright 1995-2009 - SpaceDaily. AFP and UPI Wire Stories are copyright Agence France-Presse and United Press International. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by SpaceDaily on any Web page published or hosted by SpaceDaily. Privacy Statement