Rudd Polishes Up Some China For His Resource-full Olympic Lunch

The Age

Monday August 11, 2008

John Garnaut

THE men who are shaping Australia's corporate future took time out from the Olympic Games on Saturday to tuck into some West Australian rock lobster with Prime Minister Kevin Rudd at the Australian embassy in Beijing. Together, the assets controlled by the men at the table added up to more than Australia's gross domestic product.

Rudd was flanked by Lou Jiwei, president of China's $US200 billion sovereign wealth fund, the China Investment Corporation, and Baosteel president Xu Lejiang. They both would like to know whether the PM will let them buy serious stakes in Australia's three biggest mining companies.

Opposite Rudd was his host, Australian ambassador Geoff Raby. Next to Raby was Xiao Yaqing, the president of Chinalco, the biggest shareholder in Rio Tinto. Xiao also wants to know whether Rudd will let him make a more full-fronted assault on Rio.

As luck would have it, also seated across the table from Rudd were BHP Billiton's Marius Kloppers, Rio Tinto's Tom Albanese and Fortescue's Andrew Forrest. The first two companies have become global powerhouses on the back of Chinese demand, while China has transformed Twiggy Forrest from a failed corporate maverick into a visionary and Australia's richest man.

The three Australians wanted answers to the same questions: will the Australian Government let Lou, Xu and Xiao unleash their formidable balance sheets on Australia?

Some of the Chinese corporate minders had arrived at the embassy one hour early to try and muscle their bosses further towards the middle of the table.

The Australians were more relaxed about where they sat. Their minders, perhaps, were concerned about the minutiae of takeover rules that might have made any interactions between Albanese and Kloppers a little awkward.

Also at the table was Wang Tianpu, the president of Chinese oil giant Sinopec,

one of the world's largest companies. And then there was Huang Tianwen, president of Sinosteel, which wants to turn WA's mid-west into Australia's next huge iron ore hub. There was also Cao Peixi, president of China Huaneng Power Group, who has his eyes on NSW power generation assets as well as coal and uranium.

Cao was pleased to hear that Australia's uranium is open to Chinese business.

And so the lunch list continued: Woodside's Don Volte, Trade Minister Simon Crean, China Power Investment Corporation's Lu Qizhou and half a dozen other Chinese corporate leaders who are desperately in need of Australian energy and resources.

Rudd could not have helped but notice the contrast with the prevailing mood across most of the Western world. While the US, Japan and Europe are fighting to turn around an economic and financial crisis, the Chinese economic engine that powers the Australian economy shows no signs of slowing.

China and Australia both have their short-term economic challenges but both have the fiscal and monetary tools to muddle through with comparatively little damage.

Rudd gave his usual assurances about Australia being a non-discriminatory investment destination that remains open to business. The Australian Government is still talking about the "national interest" - an infinitely flexible term that means whatever the PM wants it to mean.

Yesterday I asked Rudd whether these Chinese corporate leaders appeared to him as if they were an arm of the Chinese Communist Party or merely profit-hungry entrepreneurs. He gave the following non-answer:

"I am glad you have given me those two alternatives, can I suggest a third, lest I be verballed by a distinguished representative from an Australian newspaper, and it is this. What was great is that the ambassador was able to organise at the residence, heads of many Chinese corporations, who for us, are very old friends, friends who have been trading with Australia for 10 years, 20 years, 30 years, going back a long, long time.

"And their relationship with Australia is very deep and very broad."

Treasurer Wayne Swan has expressed concern about state-owned companies buying stakes in Australian resources that might affect the prices charged for Australian exports.

It so happens that each of the Chinese corporate leaders at the table yesterday represented state-owned companies who have their eyes on Australian resources.

Some of these Chinese leaders believe Swan's formulation, and the Federal Government's long delays in approving some Chinese foreign investment applications, looks suspiciously like an anti-China investment policy. There has been at least one high-level "please explain" from the Ministry of Commerce. Jin Xu, the ministry's vice-director for American and Oceanian affairs, recently told a Chinese newspaper: "It doesn't make sense. There's no such limit in the world. The Australian principles are contrary to those of the WTO."

Jin declined to confirm to The Age that he had been accurately quoted. China's ambassador to Canberra, Zhang Juncai, has said some Chinese companies were "puzzled" by the investment situation.

But Chinese leaders are growing accustomed to Western leaders being wary of their investment plans.

They also admire Rudd's assertive, tactful and sure-footed China diplomacy, which was on display again in recent days. Alone among world leaders, he has found a way to say what he thinks on human rights without causing offence.

China needs Australia and won't turn the investment question into a diplomatic war. Chinese companies will learn to adjust their ambitions by investing in joint venture Australian mining projects rather than hostile take overs.

And if it seems to them that Australia doesn't want their money, then there are countries in Africa, South America and South-East Asia that are lining up to take it.

© 2008 The Age

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