Should we worry about Chinese investment?

There has been some debate about comments Tony Abbott made in China regarding Chinese investment into Australia.

An incoming Coalition government would welcome Chinese investment on the same basis that we welcome investment from other countries.

It would, of course, have to pass a national interest test and the scrutiny of the Foreign Investment Review Board.

The Board looks very carefully at sovereign investment but it does that for all countries, not just China.

Chinese investment is complicated by the prevalence of state-owned enterprises.

It would rarely be in Australia’s national interest to allow a foreign government or its agencies to control an Australian business.

That’s because we don’t support the nationalization of business by the Australian government, let alone by a foreign one.

In a policy sense I don’t think those comments are controversial – that position is more or less bipartisan policy in Australia. Perhaps Abbott was a bit rude saying it out aloud but there isn’t anything new there. Despite being well within mainstream policy, I think he is wrong. I wrote a paper published by the CIS Policy magazine a couple of years ago on this point. I thought I had posted it here, but I can’t find it so it must have been before one of our server crashes.

Foreign governments investing in Australia are cause for concern because government as a particular institution that should be viewed with some trepidation. While this argument is more or less true, some aspects are worth further investigation.

The first argument that should be debunked can be described as the Tom Clancy Debt of Honor argument. This 1994 novel tells the story of a clandestine war between Japan and the United States, a Japanese consortium (secretly representing the Japanese government) acquires an American bank and uses it to crash the stock market, thereby destroying US wealth. While it makes for great entertainment, it is not the case that SWFs exist to establish beachheads in foreign economies as a prelude to military conflict. The identity of SWFs, or their controlling shareholders, is not secret. Moreover, even if SWFs were national security risks, most economies already have procedures and institutions to manage those risks.

Part of the problem may be that SWFs often purchase well-known, iconic firms. This, however, is a well-known phenomenon in international investment. All foreign investors face an asymmetric information problem and when making investments in an economy, are more likely to invest in well-known firms. It’s not surprising that SWFs follow the same pattern. The political risk here is not for the domestic economy but for the foreign government. Ownership of a well-known firm provides a target for domestic protest against foreign governments. Protesters used to target embassies when protesting against foreign governments; they now also have corporate targets.

Unaccountable foreign governments

Foreign governments are unaccountable to the domestic electorate. This is always true—not just of foreign government but also of almost all foreign investors. But SWFs are accountable to domestic standards of governance, not foreign. All firms that operate within the domestic economy are bound by local laws and as long as firms obey them, they are no different from any other firm. The problem with government is the exercise of sovereign power. Foreign governments do not exercise sovereign power in the domestic economy; consequently, SWFs should be considered as any other category of foreign investor.

The challenge for the Australian government is not the identity of large foreign investors, government or private, but ensuring rigorous standards of corporate governance for firms listed on the ASX and preventing large controlling shareholders from looting a firm’s assets or expropriating firm value from minority shareholders. Given appropriate corporate governance standards, large controlling shareholders need not pose any investment threat or any other type of threat to Australia. With appropriate shareholder protection, all investment would be in the national interest.

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66 Responses to Should we worry about Chinese investment?

  1. jupes says:

    Well, economic arguments notwithstanding, I worry about Chicom investment in Australia.

    I don’t want powerful totalitarian governments owning businesses in Australia.

    They have ulterior motives.

  2. Gab says:

    I’m tipping Monty will have loads to say on the subject.

  3. Gab says:

    Wasn’t it Labor who said ‘no’ to a chicom proposed investment in the NBN?

  4. JC says:

    Sinc I have no issue with the Chinese SWF buying passive Australian investments. Fine. However subsidiaries of the PLA are a different matter.

  5. My argument against Chinese ownership of companies operating in Australia is a simple one: I just don’t trust the ratfuckers.

  6. Simon says:

    It’s hardly a “free market” if there are disriminatory rules about who can buy shares and own stock. What if the Chinese beaurocracy decided to invest their state super fund into Australian blue chips, farms or university research it becomes too messy to start checking on whos money is whos. Let alone who owns the resultant products and licenses. Each investor should be just another investor or free market economics has signed it’s own death warrant.
    Money is the solvent of governments and institutions. Throughout the 20th century the banning of trade and investment was the surest way to war, better to keep your enemies close, it’s the only way to edge in front.

  7. maurie says:

    The explanation for the utter idiocy of the union/green/Labor team is quite simple. Not between them all would any enterprise experience be present, & the ‘Command Economy’ is much closer to their dream of a Russian one than any other. They seem to be deliberately blind to the several Australian citizens presently looking at ten years sentences simply because whenever business disagreements occur, the Chinese partners simply use all Government resources to win, fairly or unfairly. The brain dead idiots currently soaking up tax free salaries in our parliament are constantly drawing on a century old & very much dis proven reasoning since their union indoctrination prohibits any modern reasoning!

  8. jupes says:

    Throughout the 20th century the banning of trade and investment was the surest way to war, better to keep your enemies close, it’s the only way to edge in front.

    You mean as close as Germans living in Czechoslovakia, Austria and Poland in the late 1930’s?

  9. Entropy says:

    My view was that the motives/goals of a SOE would be different to that of a normal investment, that is, profit maximisation. I realise now that this is merely a milder version of the Tom Clancy gambit described above. Or that the Tom Clancy gambit is really my misgivings taken to the extreme.

    In reality, the SOE, if under government direction, would be focussed on food security in the case of a farm or grain handling facility, or a mine for resource security,as examples.

    But I also have some sympathy for the niail ferguson view that this type of investment led by state direction could end up as some form of colonialism, even if that was not the intention, as governments act to protect their investment. The ferguson speculation of an accidental form of colonialism was based on Chinese investment in Africa, which is much more extensive investment than anything proposed here.

  10. Gab says:

    Perhaps Abbott was a bit rude saying it out aloud

    Not at all. The Chinese respect forthrightness and Abbott did it in such a way the Chinese did not lose face.

  11. hzhousewife says:

    maybe we should allow at least one or two little union to survive, then when we need the wharves blockaded to stop the Chinese owned wheat/rice/beef etc being exported across our docks, our starving populace could be “saved” by the heroic unionists …….. ooops no, that wouldn’t work, they’d sell us the wheat/rice/beef
    at extortionate prices so they could still operate their holiday homes….. drat…..

  12. Bruce says:

    Hmmm, I remember the ASX and the Singaporean government owned exchange. Hypocrisy much? The ALP is of course not known for such capitalist running-dog traits as hypocrisy.

  13. Keith says:

    Fact is stranger than fiction Sinclair. The DTC has been hanging by a thread on probably more occasions than have been reported (usually well after the event). The term computer glitch can cover anything from kicking out the power cord to a full on cyber attack. Remember the reaction when that guy made off with the Goldman Sachs HFT software and tried to sell it?

    I’m happy to see investment by SWF’s, but I don’t want to see Chinese businesses being run in Australia as if its just a little bit of China (importing their own labour, setting up their own ‘towns’). They do that stuff all over Africa, and the Algerians for one are pretty sick of it.

  14. Jumpnmcar says:

    Although Smith is the most prevalent surname in the English-speaking world, it is held by fewer than five million people worldwide. Its popularity is dwarfed by the world’s most common surname Li, which is held by over one hundred and eight million people. Indeed, each of the twenty most common last names in China represents more people than all of the world’s Smiths.
    Smith was the most prevalent surname in Canada until 2006, when it was overtaken by Li.

    Just sayin.

  15. Alex Pundit says:

    If you tune in to 2GB after 9:00pm on the odd weeknight, you’ll hear Brian Wilshire saying stuff like NSW selling it’s electricity assets off will enable the Chicoms to conduct covert sabotage in a sort of new cold war.

  16. m0nty says:

    Just sayin.

    Blow the dogwhistle, the dogs come running.

    I have a bit of work to do, will be around presently.

  17. MichaelC58 says:

    With the greatest respect, Sinclair’s argument strikes me as uncharacteristically naive. Perhaps national security is not the realm of economists.

    “Moreover, even if SWFs were national security risks, most economies already have procedures and institutions to manage those risks.”

    That would be procedures like the ones that protected us from financial harm like the GFC? Procedures that secure our borders? Perhaps procedures in the US that discover sleepers after decades? It’s a big assumption to invoke an omnipotent ASIO or ASIC as removing all such risk.

    Foreign governments do not exercise sovereign power in the domestic economy

    Well, that’s alright then. If they misbehave, we can arrest and imprison without a second thought any of the foreign executives, because China is a model on an international citizen and will understand.

    The identity of SWFs, or their controlling shareholders, is not secret.

    True – it’s the politburo, right? Or we can ring and ask Stern Hu, oh wait…
    Hugh White said in relation to Stern Hu:

    Well, I think we are facing something very important here – that is that we are starting to work in a world in which very big and powerful states are governed in a way very different from ourselves. We have been a very lucky country. For a long time we have lived in a world where the rules are set by our big and powerful friends. We are now moving into a world in which, Australia in particular and for the world in general, very powerful countries like China, immensely influential in the international system and the global economy, are governed in very different ways.

    I am not saying we should put up walls to investment, but we should not be naive either, how is Tony Abbott’s argument wrong:

    we don’t support the nationalization of business by the Australian government, let alone by a foreign one.

  18. Aqualung says:

    Monty is a stupid name for a dog.

  19. Aqualung says:

    Anyway, Pavlov used bells to prompt his dogs to salivate.

  20. Jim Rose says:

    if foreigners want to pay over the odds to invest here, let them.

  21. candy says:

    Australians don’t share the same aspirations and values as the communist regime, there’s a good reason to start with why it’s a worry.

  22. Chris says:

    The Howard government didn’t oppose the purchase of Optus by a Singapore government controlled company. And whilst they’re a lot better than China, Singapore’s democratic credentials are rather questionable (they have elections but people opposing the government are regularly sued into bankruptcy making them ineligible to stand for election)

  23. m0nty says:

    In a policy sense I don’t think those comments are controversial – that position is more or less bipartisan policy in Australia.

    I think you may be mistaken on that one, Sinclair. Labor approved the acquisition of the Tully sugar mill by COFCO, a Chinese SOE, and are facilitating much more through Austrade.

    Documents seen by The Australian Financial Review, titled The China Food Security Study, reveals the Chinese companies were interested in investing more than $500?million in agricultural ventures ranging from dairy farming and ultra-fine wool production to animal husbandry and frozen vegetables. One of the documents indicates that the Nanshan Group, ranked 188?in the top 500 enterprises of China, is intending to secure four properties with an area of about 30,000 hectares in NSW and Tasmania for the ­production of superfine wool.

    Another Chinese government-backed company, Shaanxi Kingbull Livestock Co, is intending to buy a 5000 hectare cattle station in Australia as a stepping stone to importing 10,000 high-quality beef cattle and calves from Australia each year.

    Bill Shorten was all over the purchase by another Chinese SOE of $213 million of agricultural land in the NSW tablelands.

    I am tipping Abbott wouldn’t have included those in his definition of “rarely”. Abbott is signalling a big shift to protectionism.

  24. C.L. says:

    …Abbott is signalling a big shift to protectionism.

    LOL.

    Has Shorto had anything to say about Gillard’s disastrous car protection policies (which recently ended in hundreds of men being sacked)?

    No no. The shift to protectionism has occurred under Labor auspices – just as the shift to banning free speech has occurred under Labor. We could also add that the ALP’s shift back to racist anti-Asian dog-whistling – an historical default setting – is a cause for far more concern to the region’s observers than Abbott’s remarks.

    As for the issue itself, it’s not about accountability or bottom lines. It’s about morally differentiating ourselves as superior to the Chinese mass murderers and being careful to never give them to understand that they’ve been rehabilitated in our eyes. Morally, they’re bums of the worst kind and must be treated with a certain imperious prudence accordingly.

    Finally, we must keep in mind that Bob Carr BA Hons, CWB is a fantastic moron – the only foreign minister in the world whose most notable utterance is an enthusiastic endorsement of Dred Scott. He makes Joe Biden look like Talleyrand.

  25. entropy says:

    here is an interesting youtube of a debate on chinese investment in africa. The funny bit is the end where Niall Ferguson has a go at statements by Fareed Zakaria

  26. Bruce says:

    The Howard government didn’t oppose the purchase of Optus by a Singapore government controlled company.

    Chris – we are talking here about criticism of Mr Abbott by Mr Carr, where Mr Carr is implying that telling the Chinese state owned companies they can’t buy Oz acreage is the White Australia Policy The Sequel. He was on NewsRadio this morning, I know what I heard.

    Swan blocked SGX. Are you saying Swan was racist, like Carr is implying of Mr Abbott? For the record here is what Carr told Tony Jones:

    Now taken together, taken together this would send a message to the world under an Abbott Government that somehow Australia was retreating to its old certainties of the 1950s. Talking about the anglosphere is sending a message that – forget Africa, forget the Caribbean, forget above all Asia; Australia’s more comfortable with its old friends: New Zealand, Canada, the United States and the United Kingdom.

    My emphasis. Unmistakeable innuendo. Disgusting.

  27. Sinclair Davidson says:

    m0nty – see here and here.

  28. m0nty says:

    The challenge for the Australian government is not the identity of large foreign investors, government or private, but ensuring rigorous standards of corporate governance for firms listed on the ASX and preventing large controlling shareholders from looting a firm’s assets or expropriating firm value from minority shareholders. Given appropriate corporate governance standards, large controlling shareholders need not pose any investment threat or any other type of threat to Australia. With appropriate shareholder protection, all investment would be in the national interest.

    This is well said, Sinclair, and is in direct opposition to Abbott’s comments. Far from approval to Chinese SOE investments being given “rarely” due to moral/ideological interference by politicians, trust should be put in the institutions of the law and regulation to ensure that investors of any stripe do not flaunt the laws or conventions of their host country.

    Of course, I am sure the usual suspects are waiting to throw “but what about Gina” at me. The case with Rinehart and Fairfax is a different one. Rinehart has made public noises to the effect that she wants the ability to interfere with editorial and trash the fabric of the newspapers. It would be the equivalent of a Chinese SOE executive strolling into some bucolic dairy farm on the central coast with chequebook in hand and announcing that he was going to frack for oil until the local bowls club imploded. Chinese SOEs are far more civilised in their investment strategy than Rinehart has been with Fairfax, and should get far more respect than Rinehart merits.

    We have already seen examples in this thread of outright anti-Chinese xenophobia, which comments like Abbott’s are designed in part to foment. It is a shameful hearkening back to the Howard era, pandering to the Hansonite minority with thinly disguised dogwhistles. Disgraceful.

  29. Sinclair Davidson says:

    There is also this excellent piece by Stephen Kirchner.

  30. Infidel Tiger says:

    Chinese SOEs are far more civilised in their investment strategy than Rinehart has been with Fairfax, and should get far more respect than Rinehart merits.

    You got me! For a while I thought you were being serious. This was a quality troll, mOnts. Almost Tillman like.

  31. Gab says:

    The executive director of Australia’s Foreign Investment Review Board, Patrick Colmer, gave a speech last week that was interpreted as signaling a tougher stance toward foreign investment in the resources sector. Mr. Colmer indicated a government “preference” for foreign interest in new (or “greenfield”) projects to be limited to 50% and investments in major Australian producers to be kept below 15%. That the speech was given to the Australia-China Business Council left little doubt as to the intended recipient of the message: Chinese state-owned enterprises.

    This policy preference had already been implied by the limits Australian Treasurer Wayne Swan placed on previous acquisitions, such as Sinosteel’s acquisition of a 49.9% stake in Murchison Metals last year.

    Gosh, Sinclair, the above is from one of your links. Wow. It’s just like what da Abbott said.

  32. Foreign governments do not exercise sovereign power in the domestic economy; consequently, SWFs should be considered as any other category of foreign investor.

    Exactly correct. Let’s take their money and enjoy the benefits. It will be our loss if we knock it back.

    This site is becoming a chorus of One Nation, looking at the comments above. Xenophobia please explain!

  33. C.L. says:

    The case with Rinehart and Fairfax is a different one.

    LOL.

    Rinehart has made public noises to the effect that she wants the ability to interfere with editorial and trash the fabric of the newspapers.

    An invention of Monty’s febrile, far-left imagination.

    anti-Chinese xenophobia

    A few weeks ago, Labor in WA held a white power rally against Asian workers. Most Asians tend to vote for the Liberal Party. That’s why arch-racist Gough Whitlam wanted Vietnamese boat people to be sent back to the gulags.

    We see again that Monty is out of his depth intellectually. If you could restrict yourself to your middle-aged men’s website, Monty, we’d all profit from your silence.

    By the way, it was reported that the Chinese gave Abbott unprecedented respect and access for an Opposition Leader. They respect strength.

  34. Chris says:

    Swan blocked SGX. Are you saying Swan was racist, like Carr is implying of Mr Abbott?

    I wouldn’t say racist, but appealing to xenophobia, yes.

  35. Bruce says:

    We have already seen…

    Monty, now you’re doing it. Do you work in Mr Carr’s office? Perhaps you should actually look at what was said.

  36. Infidel Tiger says:

    I’d be quite happy if the Chinese Govt bought the NBN, our desal plants and every renewable energy firm in the country.

  37. Gab says:

    I wouldn’t say racist, but appealing to xenophobia,

    Abbott:

    Our friendship with China is more recent than that with Japan and less developed than that with the United States but it is increasingly important for us and far from insignificant for the Chinese.

    It’s important to appreciate that the relationship between Australia and China hasn’t simply been an economic one.

    Modern Australia is an immigrant society to which Chinese people have been coming almost since the arrival of the First Fleet in 1788.

    It seems that the first Chinese person to arrive in the then-colony of New South Wales was Ahuto, a carpenter, who came as a free settler in 1803.

    The founder of Australia’s wool industry, John Macarthur, employed several Chinese.

    The first Chinese to achieve some prominence was Mak Sai Ying who became publican of the Lion Inn in Parramatta in 1829.

    Thousands of Chinese joined the gold rushes from the 1850s, feeding Australia’s first resources boom.

    By the time the six colonies formed a new Commonwealth, at the turn of the last century, more than 100,000 Chinese had come to Australia.

    By then, though, the gold had dwindled. Many of the Chinese miners had gone home.

    Others had become craftsmen, market gardeners, grocers and cooks.

    They had settled in Australia’s growing cities and established small businesses.

    Notwithstanding the limitations of official policy or occasional private prejudice, Australians have always been an easy-going people ready to think well of others and to take them as they find them.

    Parliamentary support for a restrictive immigration policy didn’t prevent Chinese-speaking Senator Thomas Backhap from being a well-respected MP.

    There were Chinese Australians in the armed forces, such as Private Bill Sing, a sniper at Gallipoli, who won the Distinguished Conduct Medal.

    Since immigration restrictions were finally lifted in the 1960s, hundreds of thousands more Chinese people have settled in Australia as students, skilled workers and professionals.

    No less than Britons, Greeks, Italians, and Vietnamese, they have felt the gravitational pull of the Australian way of life.

    Their ready integration into the life of our country should give Australia and China a level of comfort and familiarity in dealing with each other.

    Australia’s cultural self-confidence has come from testing our ideas and our ways of doing things against those of others and changing ours whenever they have been found wanting.

    The Chinese restaurant, long ubiquitous in Australia’s suburbs and towns, was an early sign of our readiness to absorb foreign ways and make them part of our own.

    Many of the 700,000 Australians of Chinese ancestry have come via Singapore, Malaysia or Hong Kong and could readily appreciate Australia’s British heritage.

    These days, Australians of Chinese background abound in our professions and dominate the academic results of many of our best schools.

    Dr Victor Chang was one of Australia’s finest cardiologists. Professor John Yu, a former Australian of the Year, is one of our foremost paediatricians.

    Their emphasis on the importance of family, hard work and education; their business acumen and their instinct, in Prime Minister Menzies’ phrase, to be “lifters not leaners”, make them model citizens.

    I’m proud that the first Chinese-born member of an Australian parliament was a member of my party: Helen Sham-Ho MLC.

    So was the first Chinese-born member of the national parliament, Senator Tsebin Tchen.

    With their respect for tradition and aptitude for business, Chinese people should be natural liberal conservatives.

    Australia’s conservative political leaders have good Asia credentials.

    It was Menzies who first referred to Asia as the “near north” rather than the “far east”.

    It was the Menzies government that launched the Colombo Plan for the future leaders of Asia to study in Australia.

    It was the Holt government that ended the embarrassment of the “white Australia” policy.

    Since Deng Xiaoping first introduced market reforms and opened China to the world, Australian governments of both sides have striven consistently to cultivate the best possible relations with China.

    What a xenophobe, eh?

  38. m0nty says:

    m0nty – see here and here.

    Yes Sinclair, the WSJ piece confirms the reason that I thought you should post this thread: rightwing thinktanks like the IPA and the CIS (of which Kirchner is part) are against protectionism in all its forms, and that includes what Abbott was talking about. Kudos for finally sacking up and affirming your stance against Abbott restricting the flow of global capital.

    As for the examples cited of Swan and the FIRB blocking certain Chinese investments, those seem to me not to be so much about national security but competition. Given that China already produces 90% of the world’s rare earth mineral supply and Lynas is one of the few non-Chinese companies to offer hope of breaking the near-monopoly, that’s a no-brainer. The Murchison case was also about diversity of ownership given the Midwest acquisition – and I am guessing Swan approved the Midwest one too. If you can point out an example of Swan blocking a Chinese SOE just because it’s a Chinese SOE and no other reason, that would make your argument.

  39. perturbed says:

    Foreign governments may be accountable to Australian regulatory bodies on Australian soil, but those RBs are in turn susceptible to pressure from Australian governments; which (as we have seen since late 2007) may regard themselves as, or behave as if they were, more accountable to those foreign governments (or worse, NGOs) than they are to their own electorate.

    Therefore, there must be no foreign government (or government-agency) investment or ownership permitted of Australian soil or infrastructure. Ever. Full stop. To allow or permit it should be actionable as treason and subject to the death penalty after military court-martial.

  40. Gab says:

    I’d be quite happy if the Chinese Govt bought the NBN, our desal plants and every renewable energy firm in the country.

    Seconded. We could throw in the Greens for good measure as long as they took them back to China.

  41. Token says:

    Why do you argue with M0nty? Since he started whining about this last he has not actually been able to prove any claim he or Carr has made about Abbott.

    About the claims of White Australia Policy by Carr, funnily enough Abbott had the balls to go to Beijing and talk to them about the legacy the Labor & Protectionist Party gave our fledgling nation:

    Australia’s conservative political leaders have good Asia credentials.

    It was Menzies who first referred to Asia as the “near north” rather than the “far east”.

    It was the Menzies government that launched the Colombo Plan for the future leaders of Asia to study in Australia.

    It was the Holt government that ended the embarrassment of the “white Australia” policy.

    Once again that embarassment Bob “Dred Scott, Yes, a great decision” Carr proves that the country will be better off when he leaves public life.

  42. Chris says:

    Gab – Abbott and another politicians are quite capable of saying one thing in one situation and contradicting themselves in another. Just look at the various quotes he’s made on climate change and how we should address it over the last few years.

    If you want to put a price on carbon why not just do it with a simple tax.

  43. Gab says:

    Stick to the subject at hand, Chris.

  44. Bruce says:

    He’s dead wrong on Chinese REE too. Perhaps he might like to read about metallurgy, competitive advantage and the time it takes to develop projects in Julia’s Green Peoples’ Republic of Fabian Australia. REE are not rare.

  45. C.L. says:

    Hey, Monty – do you agree that Sky should have been given that tender victory over the ABC?

    I don’t recall you commenting on it.

    Kudos for finally sacking up and affirming your stance against Abbott restricting the flow of global capital.

    Fantasy football Abbott Monster utterances.

    Rinehart has made public noises to the effect that she wants the ability to interfere with editorial and trash the fabric of the newspapers.

    Links please.

  46. Token says:

    What is your point Chris?

    Should he be held to the same standards as “Hysterically Inaccurate” Swan and “No Carbon Tax under a Government I Lead” Gillard per M0nty’s clip above?

    If he is he met the standard and did more because of this critical paragraph:

    The Coalition understands the importance that other countries place on security of supply and, in government, would avoid self-indulgent gestures such as suspending live cattle exports to Indonesia in panic over a TV programme or cancelling uranium sales to India to appease the Greens.

    As usual the game from the Lefty’s is to measure the responsible side of politics against and absolutist strawman.

  47. JC says:

    Rinehart has made public noises to the effect that she wants the ability to interfere with editorial and trash the fabric of the newspapers.

    haahhahahahahahahahahahahahahahahahahaahaha

    Monster, the editorialists hero.

  48. JC says:

    As for the examples cited of Swan and the FIRB blocking certain Chinese investments, those seem to me not to be so much about national security but competition. Given that China already produces 90% of the world’s rare earth mineral supply and Lynas is one of the few non-Chinese companies to offer hope of breaking the near-monopoly, that’s a no-brainer.

    What’s s no brainer is you monster, you moron. First off rare earths really aren’t all that rare. Secondly the crap written about rare earths is something gullible eggheads like you seem to buy into. The real problem with rare earths is the lake of poisonous sludge produced and there is absolutely no way the Australian government would allow it. You know think of da ‘vironment. So STFU as it nearly all ends up in China for processing anyway.

  49. Fisky says:

    Sorry did m0nty just claim that Gina Reinhart is a greater strategic threat than the People’s Liberation Army? It would certainly seem that way.

  50. Chris says:

    Token – my point is that pretty much all politicians that have been around for a decent amount of time say quite contradictory things. Just because Abbott is against xenophobia in one situation doesn’t mean he doesn’t appeal to it another (whether he actually believes in it or not is a different matter, but you don’t get between a politician and a bucket full of votes!)

    I think in general we have an unreasonable fear of foreign investment, especially of things like farms which foreign entities are not going to be able to take home. If it ever came down to a national emergency or a war like situation the government of the day (whether it be Liberal or ALP) would simply compulsory re-acquire the assets, especially if the foreign owner was the one we were at war with.

  51. JC says:

    Sorry did m0nty just claim that Gina Reinhart is a greater strategic threat than the People’s Liberation Army? It would certainly seem that way.

    Yes he did. however with the price heading lower I think that comparison about to look pretty silly.

  52. Token says:

    I think in general we have an unreasonable fear of foreign investment, especially of things like farms which foreign entities are not going to be able to take home.

    I do agree with this statement, but believe prudence is required when it comes to assets in position of the country which has the largest armed forces in our region and a history of using them to project their power when their self interest is involved (Spratly Islands & Senkaku Islands.

    I do not agree with the first part of your statement as you are judging Abbott on the basis of your cynicism on the matter. I watched the Howard government in action and agree with most of their calls.

    The fact is the move to end uranium sales to India and cattle sales to Indonesia are real and have happened yet once again Labor gets a pass while people attack Abbot, Abbot, Abbot on what he has NOT done.

  53. JC says:

    Let’s think about this for a moment. The only concern I and most people here have about direct investment is one only. That’s the concerns about Chinese government agencies making direct investments here. That’s it as far as i can see.

    And there are people accusing others here of being xenophobic. FFS. Get a grip.

    No other form of either direct or portfolio investment has been criticized by most people here, but only this form.

    David Leyonhjelm, I think you made this accusation too, however I can recall you being against the big supermarket chains selling milk at $1 per liter as you felt it would damage the farmers.

    That looks to me to be more problematic over the issue of open trade than does allowing subsidiaries of the PLA to make direct (not portfolio investments) here.

  54. Bruce says:

    JC – Sorry mate to be consistent I have to pull you up also. There is no ‘lake of poisonous sludge produced’ in a REE operation outside of China (and even they are cleaning up). The issue is refining complexity, you need a lot of metallurgists to babysit the process. China has lots of cheap metallurgists, which is why they snaffled the industry when the prices were low. This is no different to the magnesium industry, although the technical reason there is the Pidgeon Process uniquely suits Chinese conditions better than in the West.

    As to rarity, there’s an operating mine in Oz which contains about eighty million tonnes of REO. It is not recovered as it would be nearly pointless to do so. If they tried the prices would immediately fall. Catch 22.

    Sorry for going off thread.

  55. Fisky says:

    I just thought I’d ask if m0nty went on record criticising Gillard’s neo-colonial second-guessing of East Timor on the asylum issue, despite repeated warnings and a parliamentary motion to the effect that they had no intention of taking part.

  56. C.L. says:

    Monty, where are those Gina links?

    Rinehart has made public noises to the effect that she wants the ability to interfere with editorial and trash the fabric of the newspapers.

  57. dover_beach says:

    He’s having dessert, fellas.

  58. Fisky says:

    The only concern I and most people here have about direct investment is one only. That’s the concerns about Chinese government agencies making direct investments here.

    That, and the Chinese government’s aggressive attitude to the natural resources of other countries in the region.

  59. Ivan Denisovich says:

    Makes me wonder whether Abbott isn’t contemplating this sort of thing as policy:

    In either of these scenarios, special government bonds would become a means for super funds to invest in a government-backed agency for infrastructure investment and/or for funding the massive expansion of mining agriculture and other enterprises.

    http://www.newsweekly.com.au/article.php?id=5224

  60. Bruce says:

    And that the Chinese are disinclined to allow reciprocal investment. ANZ for example can’t go over 20% on Bank of Tianjin. Legions of other cases like this. And then there’s the funny games, where legitimate investors are arrested or forced out.

    I’d withdraw my concerns if there was a real bilateral treaty with teeth, but there won’t ever be one. China is too nationalist and too many players have too much to lose if they did properly open up.

  61. JC says:

    It doesn’t matter if there aren’t reciprocal arrangements. That ought to never form part of the decision making process primarily because trade is not zero sum. Even if they choose to close their markets and we leave ours open, it helps raise our living standards not hinder us. It’s their loss if they don’t open their markets.

    The decision in allowing their government agencies to invest directly here is not really just a raw economic one.

  62. Bruce says:

    True, JC. It just rubs me up the wrong way when China treats foreign investors parochially but expects you to kowtow to their FDI. But yes, investment is investment, and while their capital is in Oz it is subject to Oz goverment sufferance (and law) same as we all are.

  63. Niccolo says:

    I’d be quite happy if the Chinese Govt bought the NBN, our desal plants and every renewable energy firm in the country.

    Yes, I imagine the PRC having total control over the future communications infrastructure of Australia, encompassing the backbone for confidential business and governmental traffic, would represent no risk at all to her national security.

    Ciao

    Niccolo

  64. Winston SMITH says:

    Bruce, you are quite correct with the pricing of the REO. However we don’t have a strategic metals stockpile, and really, we should have.

  65. William M says:

    Something’s missing from all the above arguments which I frequently ponder: If Australia was a globally competitive economy would we need to worry about foreign ownership? However if we were rich, productive, and didn’t hinder investment it is more probable that we would domestically possess both the capital/resources to buy, and be best placed to efficiently price most of our assets more productively than any foreigners could. Now this wouldn’t always be the case, of course.

    Putting it figuratively: Like many other issues we spend a lot of time debating we are here debating how to treat the symptoms, not curing the disease.

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