November 10th 2007

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Articles from this issue:

COVER STORY: Farmers' protest in Canberra over national water plan

EDITORIAL: Howard and Rudd - the Coke vs. Pepsi election?

RURAL CRISIS: Crocodile tears and hand-wringing over drought

CANBERRA OBSERVED: Why voters have turned on John Howard

INTERNATIONAL TRADE: China's aggressive trade strategy pays off

FOREIGN INVESTMENT: Risk for Australia in dependence on China

PUBLIC AFFAIRS: Overdue steps to ensure open government

STRAWS IN THE WIND: Victoria's hospital fiasco / Shooting fish in a barrel / Misreading America

POLITICAL IDEOLOGIES: How family-friendly is the free market?

DRUGS POLICY: Illicit drugs and the federal election

REPRODUCTIVE HEALTH: Exposing the abortion-breast cancer link

OPINION: A Rudd election win will be a disaster

OBITUARY: A Labor Party statesman remembered - Hon. Kim Edward Beazley Snr. AO (1917-2007)

AS THE WORLD TURNS: Christian foster-parents face deregistration / Marital status and poverty - study

BOOKS: CREATORS: From Chaucer to Walt Disney, by Paul Johnson

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Risk for Australia in dependence on China

by Jeffry Babb

News Weekly, November 10, 2007
The government and people of Australia should think carefully how we should respond when Beijing comes knocking on our door with buckets of money and a shopping-list.

Australia is a treasure house of minerals in a resource-starved world. We are attracting foreign investment as a lonely light on a dark night attracts insects.

Interest is coming from investors in countries all over the world - China, Russia, Korea, Japan, Malaysia and even Norway. What does this disparate collection have in common? They all have tens of billions of dollars to spend, and they are hungry for Australia's mineral wealth.

Foreign investment in Australia is not new. Australia was built on foreign investment.

Investment in mines is not new either - as Sir Charles Court, former Western Australian premier and minister for industrial development, always correctly maintained, a mineral is just another rock until you dig it out of the ground and load it on a ship. For that you need money to develop mines and markets.

Iron ore

The British, Americans and Japanese all invested in Western Australia's iron ore mines. The investment was not always welcome, but it did have the advantage of getting mines into production.

We've learned to deal with these traditional investors; but the newly rich, especially the Chinese and the Russians, are a different kettle of fish. The traditional investors' interests were ultimately commercial. They were private investors who were aiming to keep their shareholders happy. The Russian kleptocrats are generally acknowledged as being ugly customers and ruthless in their dealings - and all have close links to the Kremlin. They are, however, businessmen whose aim is to expand their vast fortunes and make as much money as possible.

The Chinese are different again. Theirs are not private firms in any meaningful sense of the word - China's sovereign wealth funds and state-owned companies are all directly answerable to the Communist Party in Beijing. They are not commercial entities - they aim to make a profit, if possible; but their primary aim is to further China's strategic interests.

Let's look at how Beijing operates in other parts of the world. China's strategic and commercial interests generally go hand in hand. In Sudan, Chinese oil companies have important petroleum reserves. As a result, China has prevented United Nations action on Darfur to stop the still-unfolding genocide, because it has used its veto on the UN Security Council to stymie attempts to bring the Arab-dominated regime in Khartoum to heel.

The Khartoum government is propped up at China's convenience. As long as it does Beijing's bidding, it will retain power.

And about the recent troubles in Burma? Beijing has fully supported the current vicious military-backed regime against the movement for democracy in Burma. Why would it act any differently?

China is a communist dictatorship with no love of liberty, and Burma's generals are much easier to deal with than a popularly elected government. Burma, in addition to exporting its gas to China, borders China's strategic and economic rival, India.

The examples could be multiplied. In all cases, China has its own people to operate the enterprise - that is, it imports workers to do the job. Chinese immigrants dominate whole sections of business in Africa, South East Asia and the Pacific Islands. Short of putting them on boats to go elsewhere, as Vietnam did with its Chinese population, once they gain citizenship they are impossible to dislodge.

This new Chinese colonialism is far harder to overcome than the European variety, not merely because Beijing is dealing with weak states, but because it is based on concurrent strategic, commercial and Chinese community interests.

Chinese companies are different from our traditional investors, which are public companies that must publish detailed financial accounts for their shareholders and government regulators.

The management of China's state-owned firms is a black box, and possibly only a few people in Beijing know the true financial situation. Chinese companies traditionally have kept three sets of books - one set for the authorities, one for the shareholders and one for the true owners, whose status as proprietors may or may not be publicly acknowledged.

In this case, the "proprietors" are government insiders and ultimately the Communist Party, who have no interest in letting the international community in on their secrets.

The entity charged with managing the hundreds of billions of dollars in Beijing's vast foreign currency reserves could easily spend the $200 billion necessary to take over BHP or Woodside - and scarcely even notice it.

Australia could handle this situation in one of two ways. We could be like Britain and sell any company at all, no matter how iconic, to the highest bidder. Or we could be like the United States, and put certain companies and industries off-limits to foreigners.

The government and people of Australia should think carefully how we will handle it when Beijing comes knocking on our door with buckets of money and a shopping-list.

- Jeffry Babb was until recently a Taipei-based journalist.

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