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Mr Crean: This has been a very busy week but an important end to the week, starting in Beijing where we had the High-level Economic Cooperation Dialogue. We visited other cities, laying the foundations for another MoU with Shandong province. The participation in a number of important sectoral events at the Shanghai Pavilion, the Australian Pavilion, which is a magnificent pavilion and a great facilities for interaction and engagement with business counterparts in China. And of course, finishing up down here in Baosteel. Baosteel says a lot about the integrated relationship between Australia and China. Of course Baosteel takes a lot of our iron ore. It takes some coal, but a lot of our iron ore. But Australia also purchases a lot of equipment, finished product, from Baosteel, for example, the recent largest gas deal with China that Australia announced, also involved a successful tender by Baosteel for supply of the gas pipeline. So we have seen some of the product built, that will be shipped into Australia commencing in August. So, I think it’s a good example of the two-way trade. People tend to think that China simply takes our iron ore, and that’s the end of it. This is a very integrated operation. And the more you like at what Baosteel is supplying the industry with, the automotive sector, which is the fastest growing... It is the largest market in the world for autos, the largest producer of autos and the discussion we had with the automotive sector at the Expo, is another example of where Australia is developing the integrated relationship with the Chinese automotive industry. So finished product for the automotive industry. They tell me that Baosteel supplies fifty per cent of the skin product for vehicles, for the construction of vehicles. So, again, it’s a very important opportunity for us to go further along the value-added chain, in strengthening our economic relationship. The Shanghai Expo, of course, is going to give us a vital opportunity over the next six months to engage in so many different levels, in so many important sectors to the Australian economic development. But, importantly, that’s an economic development that’s already strongly enmeshed with China. We believe that will only strengthen and deepen as the years go on, and this year will be an important year to build on that. Given that Australia is the only developed economy in the world who have avoided the recession, China is respectful of it, in particular, appreciative of the strength of our financial services sector and is very keen to develop partnerships on a number of different levels with us.

Reporter: Have you had a chance so far on your visit here today to broach the issue of the mining tax?

Mr Crean: I’m sure the mining tax will be talked about again over lunch, but I’ve had the opportunity to talk about it in the car. Again, I think these are important opportunities to explain more fully how the tax will work. It won’t have an upward price effect, it’s a tax on profits. It’s not a tax on consumption. But importantly, revenues from that mining tax will go to expanding infrastructure in Australia. That was an issue that Baosteel raised with us; the requirement, as they see it, for more investment in infrastructure in the iron ore sector of our economy. And also the fact, that the structure of this tax will in fact encourage expanded investment in the iron ore sector. And obviously, given their overall concern about price, the most effective way to address the price issue is to expand supply.

Reporter: Did the Vice-President of Baosteel during your conversation this morning raise any concerns about the tax, about the price impact?

Mr Crean: No, he didn’t. I think that we are fully aware of the issues they have raised, they were raised in Beijing. In fact I initiated the conversation around the tax, and put it in the context of it being designed to expand production to meet the supply side of the equation. I think what was also interesting in the meeting I held in Beijing earlier this week, was the final acceptance by the Chairman of the NDRC, that China is not seeking, looking for government intervention to affect the price, the price equation. So that argument I’ve been putting over a long period of time, that China wanted to be considered a market economy, it needs to act like one, that has been accepted. That being said, clearly there is a concern by the Government about price, and so therefore the issue of the issue of the impacts of price gets raised in different sorts of ways, but as I say, I think they are somewhat satisfied with the explanation that we’ve given, that what we’re about is trying to increase supply: increasing supply through investing in infrastructure, a tax structure that’s conducive to expanded investment, and a foreign investment climate that is welcoming to expansion of Greenfield operations.

Reporter: Minister, if you’re taxing profits, how would you suggest that companies give the same money back to their shareholders, if they can’t make the same profits in any other way, without putting prices up?

Mr Crean: Well, it depends on how you look at it. They’ve been putting a lot of profits back to their shareholders for the last ten years. And particularly over the last five years. And the point the Government has made, is that the Government share of the revenues from the expansion in the resources sector has not kept up with that huge expansion.

Reporter: From what we have seen from around this plant today, how modern do you think their steel-making process is, how dirty is it, and do you think China is doing enough to embrace the sort of technology they could be?

Mr Crean: Well I’ve been in a lot of steel plants in my time, hot-rolling and cold-rolling processes. This is a very modern plant, the investment has only been made since 2005 in the mill that we saw today, and it is the state-of-the-art rolling equipment. As for the environment, I was impressed driving around this place with the amount of greening that has been undertaken, I’m advised that forty per cent of this site and the site covers twenty square kilometres forty per cent of it has been planted out. That obviously is important in terms of the local amenity and environmental impact. It is an efficient operation, and I think the interesting thing is, whilst they have four blast furnaces here, they’re not allowed to build any more blast furnaces, they are investing in the technology is Core-Ex, but it’s a direct reduction method of steel-making and that is more environmentally friendly.

Reporter: Have you been able to pick up from your visit today, how Baosteel intends to negotiate with the Australian iron ore miners in terms of price, moving forward? Are they looking for a contract system?

Mr Crean: Well, I’ve asked them, and I’ll have further discussion over lunch as to how they see the development of the new pricing mechanism. It’s interesting that this was discussed at the breakfast, a business breakfast I did in Shanghai yesterday, and representatives from Rio and BHP were there. So I think that from the supplier side, I think this will be a more efficient mechanism, a more direct mechanism for reflecting the factors that determine the price. So it remains to be seen. We’ll have the opportunity to hear the other side of that equation, when we sit down to talk about it over lunch.

Reporter: Your observation, that if China wants to be treated like a market economy, it has to act like one does that apply to Baosteel, a massive state-owned enterprise?

Mr Crean: Of course it does. And that’s one of the reasons, in terms of the screening processes with foreign investment requirements, that the Government needs to satisfy itself of, that it is a market-based company. But the truth is, that there have been very few rejections of investment by Chinese interests in Australia, there have only been five that have involved qualified additions to the original proposal, but the vast bulk of those investments have been by state-owned enterprises, because we’ve been satisfied they are acting like markets, and they are acting in accordance with market principles.

Reporter: Is Baosteel, therefore, acting like an independent company in your view, and would you welcome Baosteel buying into resources in Australia?

Mr Crean: We not only welcome it, we have welcomed it, and we’ve sanctioned it. Baosteel has already joint venture relations with Rio. It has other interests in Australia. The question as to whether it wants to invest more, is up to them. But our regime is one that, provided we’re satisfied is going to involve expansion of the resource base, and it’s a company driven by market principles, that will be, that will satisfy the test. But the judgement about those things is not for me, as a minister, to make, it’s for the body that we’ve set up to advise us, and the Treasurer makes the final decision. Thank you.

Ends

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