【The Australian】Barnett signals business as usual with China

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Barnett signals business as usual with China  
http://www.theaustralian.news.com.au/business/story/0,28124,25838185-5018066,00.html
                                                                                               
Michael Sainsbury, China correspondent| July 27, 2009               

Article from: The Australian                                                

ITwould not normally raise even half an eyebrow: a visit to one of theworld's biggest economies by the premier of an Australian state that ishome to only 2.1 million people.

After all,with a population of 1.3 billion or more, China is more like Europe --a collection of strong, financially independent provinces all of whichoutnumber Western Australia by population.

But Colin Barnett is no ordinary state premier. And these are not normal times.

Western Australia accounts for about 68 per cent of Australia's $54billion of exports to China each year, with resources streets ahead ofthe next two biggies: wool and education. And WA is Australia' biggestmining state.

Barnett's visit was pre-arranged, but the timing was impeccable.

Australia's relationship with China has been strained by therejection of Chinalco's $19.5bn plan to rescue Rio Tinto and thejailing of four Rio employees.

"Some issues have created an awkward environment in recent months --they have been raised with me and I am glad about that," Barnett saidin Bejing on Thursday. "There is concern about Chinalco in the sense ofa rebuffing of Chinese investment."

Barnett's visit came only a week after Trade Minister Simon Creanand Industry Minister Kim Carr spent a week trying to build bridgesbetween the ailing Australian car sector and its booming Chinesecounterpart. Crean is increasingly sure-footed and impressive in hisdealings with China, but if customer focus is the main game -- as itshould be in sales -- then Barnett delivered a master class. He got thethorny issue of detained Rio executive Stern Hu out of the way earlyand then proceeded to sell the bejesus out of his state.

Barnett said China was "a special case" and he would make a special effort to assist them.

"They will get personal attention from my office. We want to makethe effort to make sure the transition from customer to investor toeconomic partner is done smoothly," he said.

Part of this included a push to have China brought into the Oakajeeport project, which will service the state's nascent iron ore mines inthe Mid West. China's Sinosteel last year bought 100 per cent ofMidwest Corp and has an 8per cent stake in an adjacent company,Murchison, with options to go higher. Barnett said he would support a100 per cent Chinese takeover of Murchison, sending its shares soaring.

In fact, at times you got the feeling he would support a 100 per cent takeover of WA by China at the right price.

China missed out on the Oakajee project in a tender run by WA'sformer Labor government. Barnett -- who is also Minister of StateDevelopment -- says he did not agree with the project. He has tappedthe federal government for funds, and a $700 million state/federal poolhas been created for taxpayers to own the port and mollify China.

Barnett joined a growing chorus of voices for a review of thefederal government's Foreign Investment Review Board, which answers toTreasurer Wayne Swan. FIRB's operations are opaque and open topolitical manipulation.

Barnett also wants an overhaul of environmental protection authorities.

"There is concern that China may be discriminated against with FIRB.There is concern with our process of approvals, especiallyenvironmental approvals," he said.

Barnett certainly seemed to get the answers he was looking for, withChinalco promising it would keep investing in Australia (though not iniron ore), and Minmetals, which bought most of the OZ Minerals assets,saying it also wanted more Australian assets. On Friday, China'sSinochem signalled that it wants to buy listed Nufarm, and bankers saythere is plenty of activity on new deals between China and Australia.

The other interesting thing to emerge from Barnett's visit was afurther indication that China' powerful National Reform and DevelopmentCommission -- which controls overseas investment by Chinese companies-- wants to tighten its grip.

"Many companies rush like a swarm of bees," Foreign Fund andOverseas Investment director-general Kong Linglong said at theAustralia China Business Council conference, where Barnett gave thekeynote address. "NRDC hopes they could inform us before negotiations,making contracts or signatures about what they want to do. This is notto approve or disapprove, but we should know whether there are manycompanies at one place at same time."
This is further evidence that China's more traditional centralplanning elements are using the global financial crisis to reassertstate control over private enterprise.

Of course, this has been highlighted in the push to centralise andconsolidate the steel sector and get better pricing -- the process Huand his colleagues got caught up in. There is now a strong sense that adeal will get done soon but won't actually mean much.

The process is slow and ultra-aggressive tactics on both sides havecaused completely avoidable damage to relations with our biggesttrading partner. Comments from some Australian armchair China expertsthat Hu is innocent make a mockery of our own evidence-based legalsystem. Sure, the Chinese haven't produced anything yet -- but undertheir own system they don't have to. Maybe we should wait and see.

One suggestion from consultancy Stratfor at the weekend was that Huwould be declared persona non grata and deported: an elegant andsensible solution. From the Chinese government's point of view the"foreign spy" situation is playing very well to their domestic audience-- its key focus right now.

For now, the unfortunate Hu and his colleagues remain locked up andAustralia's pleas for better consultant access and early legal advice-- though not from Kevin Rudd -- have come to nought.

But otherwise, it all looks very much like business as usual as bothsides fall over themselves to talk up future prospects and do deals.