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China Mining Investment Confuses the Foreign Competitors

AUTHOR: admin       DATE: 15 Apr 2014 02:13:46

According to the latest report, Australia's government should open talks with China to ease uncertainty clouding Chinese investment in the country. Although Chinese aluminum giant recently won approval to buy a 12% stake in Australian mine, Chinese investment in Australia was clouded in confusion and uncertainty. It may seem a puzzle as to how we got ourselves into this pickle over Chinese foreign direct investment. A wave of Chinese mineral and commodity firms have been eager to snap up foreign assets in Australia and other resource-rich countries to fuel China's fast-growing economy, using the cash generated by years of breakneck economic growth.

The scale and structure of these investments do not suggest any considerations of 'national interest' effects on competition or strategic importance that might recommend their non-approval. China's approval came as Australia's competition watchdog mulls BHP Billiton's $136bn all-share takeover bid for Rio to create a global mining titan, raising concerns among steel makers in China and Europe. Rio and BHP are the world's second- and third-largest iron ore producers, respectively, and some industry experts saw China's move as a bid by Beijing to protect its steel sector.

Increased uncertainty about the treatment of Chinese FDI in the resources sector is, at the margin, likely to damage the potential growth of the sector. Chinese investors are under-invested in Australia. To ease uncertainty, the Labor government should begin routine consultations between Australian and Chinese authorities for more transparent scrutiny of competition and corporate governance issues. The best way to dispel the uncertainty and confusion is through reassertion of the market framework within which all foreign investment proposals are examined.

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