Swan Lands Beijing Gold

The Age

Tuesday June 17, 2008

John Garnaut

Treasurer Wayne Swan is the envy of the diplomatic community after his visit to China.

THE Government is in no mood to boast about the strength of its relationship with China, but the Beijing diplomatic community is in awe. There are investment bankers who would give anything for an audience with any of the heads China's central bank, the banking regulator, the National Development & Reform Commission or the Ministry of Commerce, but last week Treasurer Wayne Swan got long meetings with them all.

He was even given

45 minutes with China's likely next premier, Li Keqiang.

A European diplomat says she and her embassy colleagues have discussed Swan's "very special treatment" and concluded that they "hadn't heard of anything like it in one visit".

For good measure, Swan was sent home with a heavy trophy bag. Australia was added to a five-country list of approved investment destinations for Chinese fund managers. Richard Gilbert, head of the Investment and Financial Services Association, says it is a "landmark announcement" that places Australia's fund management industry in a "privileged position".

Swan also helped push along negotiations for a trade agreement and secured high-level Chinese support for recognising Australian accounting credentials in China. CPA Australia has 25,000 overseas members, 10,000 of whom are former students at Australian universities now living in China.

The least-noticed but most important of Swan's trophies is a major engagement agreement between Australia's Treasury and China's top economic agency, the National Development & Reform Commission. The relationships that flow from this will help Australia secure a role as China's trusted economic partner, rather than adversary, throughout its bumpy economic rise. These connections will be diplomatic gold when trade and investment problems inevitably arise.

Such achievements suggest Swan can follow a brief, avoid mistakes and listen to good advice. For Swan, personally, his visit was about getting to know the Chinese leaders he will need to deal with over the next few years. The men he met hold many of the answers to Australia's economic future. But somehow he left an impression of not being particularly interested in the policies they control.

Up-and-coming cadres peppered Swan with great questions about the Chinese economy and policy settings, and the lessons China desperately needs to learn from Australia's ultra-competitive farm sector and Australia's recent efforts to reform the health and water systems. In return, Swan showed them he has mastered the Chinese art of speaking for hours and saying nothing.

Swan was asked about the potential for a regional financial crisis but he gave no reassurances about how the region had learnt important lessons from the Asian crisis, why China might be insulated by its formidable capital accounts and domestic demand, or how Australia's experience in easing its capital and currency controls in the 1980s had made the system stronger.

On the most substantial matter on everyone's mind, Chinese investment in Australia, Swan made it clear that Chinese state-owned companies are making the Australian Government nervous. He told Australian journalists that Chinese companies are more likely to be welcomed in Australia if they are listed on a stock exchange.

According to ChinaStakes.com, Swan told Commerce Minister Chen Deming he didn't want Chinese companies taking control of Australian companies. The report quotes a prickly response from Jin Xu, the ministry's vice-director for American and Oceanian affairs: "It doesn't make sense. There's no such limit in the world. The Australian principles are contrary to those of the WTO (World Trade Organisation)."

Australian sources say that Chinese report does not reflect the substance of Swan's discussions. It's also worth noting that The Ministry of Commerce takes a back seat to the National Development & Reform Commission on approving outward investment.

And Swan told BusinessDay yesterday: "My clear message in China was that we welcome foreign investment, we apply our foreign investment guidelines in a non-discriminatory way."

For some in China, at least, Swan's clear message remains misunderstood.

© 2008 The Age

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