9 April 2009
Interview with David Speers, Sky News
Subject: China's investment in Australia.
DAVID SPEERS: Simon Crean, thank you for your time. Can you tell us what is the Australian Government's position on the investment by Chinese state owned companies in Australian mineral resources?
SIMON CREAN: The first point about investment, we welcome foreign investment. We always have. It's what's contributed to the building of the nation. But we reserve the right, in big investment decisions, to consider the national interest implications. Now that's a set of rules and guidelines that apply to the source of the investment, from wherever it comes.
DAVID SPEERS: Is investment by a state owned company, and in particular a Chinese state owned company, treated any differently?
SIMON CREAN: It will be taken into account as part of the national interest test. And fundamentally it goes to the question of the transparency. The decision's been taken from a commercial, as distinct from a political perspective.
DAVID SPEERS: So when it does come to China, is there a clear distinction? Is China different, I suppose, to other countries when it comes to its state owned companies?
SIMON CREAN: No. I think it's a question of the source of the - not the source of the investment, it's the whole circumstances surrounding the particular investment.
Now, and that gets interesting because we do have to get the Chinese investment in Australia in some perspective. First of all, whilst it's been growing, it is still a very small proportion of total overseas investment in this country. It's only two per cent.
There is the issue of the Chinalco investment which is big in its own right, and has issues surrounding not just national interest but shareholder interest. So these things have to sort themselves out, one, commercially and, two, in the national interest test.
But whilst Chinese investment in Australia has been growing, so too has Australian investment into China. So this investment question is not a one-way exercise. It demonstrates, I think, the growing interdependency between our two economies.
China, last year, was our largest trading partner. Japan is now slightly back there again. But there's no question that the relationship of our future is importantly linked to China.
Now, if that's the case, it's not just a question of looking at the trade in goods, be they agriculture or manufacture, or services; you've also got to look at investment. And what I've tried to do is to make the point that, yes, investment's important to the trade relationship, but it's a two-way street.
And whilst we will have to continue to consider cases on a case by case basis into the future, we also need to develop a better framework for considering the development of investment interests, both to Australia and from Australia. And what we've tried to do is to put that investment framework into the mix as part of our free trade agreement.
DAVID SPEERS: Do you accept though that China is different to Japan? It is different to many countries. It's a communist regime. It is very controlling. It controls the media, it controls religious freedoms, it controls most companies in China. Is - is there anything to say that Chinese state or ownership of a minerals company in Australia wouldn't also try to control issues like price when it comes to the sale of these resources?
SIMON CREAN: Well, but that comes back to the consideration of the individual case. I mean, the truth of it is that we have allowed investment into this country from China that is an SOE, a state owned enterprise. Why? Because all of the factors were taken into account including the basis upon which the investment was made and who actually was in control. They're the issues for case by case consideration.
DAVID SPEERS: So there is no blanket position that state owned Chinese companies are excluded?
SIMON CREAN: No.
DAVID SPEERS: Are excluded, or will try to control the price which Australian minerals are sold for?
SIMON CREAN: No, and indeed this is an issue for consideration in the Chinalco deal, the Rio deal, about not the current customer but a potential future customer being both, well, being the customer as well as the equity partner.
DAVID SPEERS: It could screw down the price, essentially.
SIMON CREAN: Except, as I understand it with the Rio bid, they put forward a proposal that separated out the price negotiation functions of the company from the rest of the operation. So that they've sought to address that.
Now, whether they've satisfied the test is, again, a matter for judgement by the Treasurer. But, as I understand it, they've sought to deal with that.
So there's a consciousness in terms of the proponents, the bidders, et cetera, of the need to ensure that there is transparency. And then that there isn't the ability to influence the price.
You see, we recognise China's market economy status.
DAVID SPEERS: Is it a market economy?
SIMON CREAN: Well they have to operate as a market.
DAVID SPEERS: But do you say they...
SIMON CREAN: [Interrupts] They can't fix the prices. They'd have to accept market prices. And that's our argument back to them.
DAVID SPEERS: Do you think they do operate as a market economy, in all honesty?
SIMON CREAN: I think that they are increasingly understanding that they have to operate as a market economy. And they've sought that. I think it's legitimate for us to, not just remind them of it but to continue to develop mechanisms that require it.
DAVID SPEERS: Are they doing that at the moment though?
SIMON CREAN: I believe they are.
DAVID SPEERS: Okay.
SIMON CREAN: And in fact if there's any evidence that they're not, that would be taken into account in the determination of the national interest test by the Government.
DAVID SPEERS: The critics of Chinese investment here in Australia would say, well, why should we let them invest here if we can't invest in these many state owned Chinese companies ourselves? Is that a fair argument?
SIMON CREAN: I believe it is a fair argument. But that's my very point about saying we have to embrace, not fear the investment argument. We have to see the opportunity, not just look for the threat.
We need to understand...
DAVID SPEERS: [Interrupts] [Indistinct]
SIMON CREAN: No, we need to understand that there is Australian investment in China. Those companies that have invested into China, they had to go through all the procedures, all the regulatory frameworks. Some of it's tough.
We're trying to get an ability for more investment of Australian companies going into China. That's the two way street.
DAVID SPEERS: But does that link to the Chinalco deal?
SIMON CREAN: That's not linked to the Chinalco deal; it's linked to the framework of the FTA.
DAVID SPEERS: Well what should we say? Shouldn't we say, you know, if you are given the green light for the Chinalco stake in Rio Tinto, you have to let - loosen up some of those restrictions on Australian investment in China?
SIMON CREAN: No, not at all. We're saying that the loosening up has to be part of the free trade agreement. It's not conditional on each case being considered on its merits against the national interest test. That's what we require everywhere - of every country in the world seeking to invest. And we're not seeking to change that aspect of the regime.
What we're trying to do in the free trade agreement is to get a much better understanding now of the importance of investment to the development of both economies, that we need to encourage the two way street, and that we need a new framework in which to do it.
DAVID SPEERS: Just finally, Minister, if we were to do what Barnaby Joyce and others suggest and ban investment by state owned Chinese companies in Australia, where would that lead us?
SIMON CREAN: Well I believe that's a nonsense argument. That just invites reciprocity. What happens when we get banned in other countries? And, you know, if it's good enough for us to ban one country, why won't another country say to us, well we were thinking of investing in your country, but, you know, you put this ban on.
DAVID SPEERS: So it would be much broader than just China...
SIMON CREAN: Well I mean I think Barnaby Joyce really needs to think his position through. I understand the concerns that people have. We've got to try and address those concerns. But we shouldn't be cowered by them, we shouldn't hide behind them, we shouldn't use them as the excuse to not act in the national interest.
And I think it is in the national interest that we engage far better with China. We've got to do it on many fronts. It is a difficult regime with which to work at times. But we've got to be constructive, we've got to be open, we've got to be forceful in terms of putting our interests to the fore. And we shouldn't be giving succour to those that want to close up the country in the interests of so-called protecting it.
We will only advance our interests in the future if we're an open economy, if we engage with the rest of the world but we engage on our strengths, don't hide behind fears.
DAVID SPEERS: Trade Minister, Simon Crean, thank you.
[ENDS]
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