Chinese foreign direct investment in Australia: policy issues for the resource sector¹

Abstract

The past eighteen months has seen Chinese foreign direct investment (FDI) in the Australian resource sector become an issue of policy interest. There are two big questions that the prospects of a significant rise in FDI from China into the Australian resources sector have raised. Is the surge of FDI into Australian mining and energy consistent with achieving the traditional gains from foreign investment? And are there any particular problems associated with investment from foreign state-owned enterprises or state managed sovereign wealth funds? These are among the questions addressed in this paper. The paper argues that there are no issues that cannot be dealt with under the umbrella of the established test of 'national interest' in managing the growth of Chinese FDI into the Australian minerals sector. It argues that a confusion has been introduced into policy over the questions of state-ownership and supplier-buyer relations in respect of Chinese investments and that clarifying these issues is likely to be important to Australia's capturing the full benefits from the growth of Chinese resources demand and longer term economic and strategic interests in China.

The Australian Public’s Preferences Over Foreign Investment in Agriculture

“…It does, however, sit within a broader body of literature that seeks to provide critical reflection on the state of the foreign investment approvals regime. For example, Drysdale and Findlay (2009) and Drysdale (2011) considered whether investment from government-owned enterprises, particularly those from China, warranted special attention in the approvals process, while Mendelsohn and Fels (2014) examined whether the role and processes of the FIRB matched regulatory best practice.…”

Accommodation, realignment, or business as usual? Australia's response to a rising China

“…This was the first hostile takeover bid by a Chinese company in Australia and provided a test for the recently enacted law (in February 2008) that allowed Australian governments to scrutinise much more closely bids 'from investors owned or controlled by a foreign government' on the grounds of 'national interest considerations' (Drysdale and Findlay 2008: Downloaded by [University of California Santa Cruz] at 00:24 19 November 2014 24). However, the Rudd government was much more cautious in responding to Chinalco's bid in early 2008 to increase its share in Rio Tinto (the world's second largest mining company) to 11 per cent.…”

Opportunities and challenges facing the Australian resources sector*

“…The contribution of foreign direct investment to the development of an internationally competitive mining sector in Australia is well recognised (Drysdale and Findlay 2008). As well as providing capital to finance an investment rate in excess of the domestic savings rate, foreign direct investment provides exposure to international standards and best practices, access to new or modernised technology, knowledge sharing, better market access opportunities, availability of lower cost capital and opportunities for shifting risk.…”