ABC | 1 March 2013
Australian-US alliance a factor in Chinese investment decisions
The growing size and value of China’s investments in Australia makes the case for a bilateral investment treaty increasingly urgent, according to a leading China expert.
Peking University Professor Zha Daojiong is one of China’s most prominent international relations specialists.
He says Chinese companies feel discriminated against by Australia’s Foreign Investment Review Board’s special provisions for state owned companies.
But he says more importantly the US alliance is increasingly a factor in Chinese calculations about whether a major investment in Australia is a good idea.
Correspondent: Karon Snowdon
Speaker: Zha Daojiong, Professor in International Political Economics at Peking University
SNOWDON: Chinese foreign direct investment in Australia ranks ninth and amounts to 2.6% of all foreign investment.
Yet it’s a hot topic.
Professor Zha Daojiong says the Foreign Investment Review Board’s special category for state owned companies -while not unique to Australia, is not popular in China.
ZHA: There seems to be a tendency in Australia to treat Chinese companies on a separate category. Here that’s widely discussed.
SNOWDON: Professor Zha’s work focuses on China’s relationships around the issues of energy, food and water resources and he has good political and business connections in China.
He says regional strategic dynamics are also impinging on the bilateral investment climate.
As an example he cites the recent agreement for the staging of extra US marines in Australia’s northern city of Darwin in the context of the US pivot to Asia.
This according to Professor Zha has raised concerns in China over whether Australia is a safe place to invest in the event of heightened regional tensions or in the remote event of a conflict involving the US.
ZHA: I wouldn’t say it’s at the forefront. It’s a background consideration. So if Chinese company established a presence here in Australia when you have geostrategic uncertainties how would Aust be handling those assets. Or do you simply automatically say "hey wait, since we are a treaty ally with the United States we will just do as the US wishes".
SNOWDON: An investment treaty could resolve some issues.
It’s a comprehensive roadmap allowing both countries to know the rules, concerns and ambitions of investing in each others markets.
China has one with Japan, South Korea and Germany and is negotiating with the United States.
Australian negotiations on a much bigger free trade agreement with China are struggling after 8 years of effort.
Professor Zha says large investments need predictability.
ZHA: Certainly it would be conducive to building a predictable, I’m not saying profitable, I’m saying predictable relationship in investment and trade between China and Australia for us not to avoid those issues. Let’s bring it up front you know and say "fine we understand both sides have a set of concerns, lets try to address them down the road".
SNOWDON: China’s largest foreign investment to date has only recently been approved.
The national offshore oil company CNOOC paid more than 15 billion dollars for Canada’s oil and gas producer, Nexen.
Nexen has assets in the US and needed both Canadian and US approval.
It’s a big win for CNOOC, but at the time of giving approval, Canadian Prime Minister Stephen Harper said it would be the last takeover of a major resource by a foreign state owned company.
Zha Daojiong, whose fellowship at the Lowy Institute in Sydney is supported by global mining giant Rio Tinto says Chinese firms might have to reassess 100% takeovers.
ZHA: We might get into more political hurdles if we pursue either total control of a company or if we pursue majority ownership. So we need to be clear there are those sensitivities.