Australia debating Chinese investment

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Published: August 17,2010

Tags: elections, foreign investors

CANBERRA, Australia — Australia’s opposition leader said today he would be “very careful” about China buying controlling stakes in Australian companies but will not change foreign investment laws if he wins government at elections this week.

Tony Abbott, leader of the conservative Liberal Party, is in a tight race against Prime Minister Julia Gillard’s center-left Labor Party in national polls set for Saturday.

Opposition lawmakers have raised concerns that a surge in Chinese investment in Australia’s mining industry during the past three years that Labor has been in power will lower prices paid by Chinese manufacturers for Australian raw materials such as iron ore and coal.

Abbott today described Chinese businesses as an arm of China’s government.

“I would be very careful about majority ownership of Australian assets by government-controlled entities — and I’m not singling out China here I hasten to add,” Abbott said during his final National Press Club address before the elections.

“I don’t particularly want to see nationalization of businesses by Australia let alone nationalization of Australian businesses by other countries’ governments or by entities controlled by other countries’ governments,” he said.

Investments by backed by foreign government money have to be assessed by Australia’s Foreign Investment Review Board which determines whether they are in Australian interests. The government has the final say on whether such investments are allowed.

“That national interest test is very flexibly applied and I wouldn’t envisage … any changes in the rules as they currently operate,” Abbott said.

He also repeated his pledge to oppose legislation that would impose a 30 percent tax on the burgeoning profits of iron ore and coal miners if Labor were re-elected.

The government expects to raise 10.5 billion Australian dollars ($9.5 billion U.S.) in two years from the tax as the voracious demands of Chinese and Indian manufacturers drive an Australian mining boom.

Abbott cited a recent survey of 429 world mining chiefs by the Fraser Institute, a Canadian think-tank, that found Australia’s ranking as a safe country in which to invest had tumbled in six months from 18th place to 31st among 51 nations due to the proposed tax.

“The government has clobbered Australia’s most successful industry with a proposal for the world’s highest taxes,” Abbott said.

Gillard accused Abbott of denying Australians a fair return for their nation’s mineral wealth because he depended on mining companies for campaign donations.

A re-elected Labor government is unlikely to win a majority in the upper house Senate and so would need the support of some opposition senators to pass the new tax law.

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