All about containing China from rising.

August 8, 2012 (TSR) – A recent swing against foreign investment in particular the agricultural sector targeted at China and led by Australia’s Opposition Coalition made business and government in Canberra anxious at potentially damaging China blowback.

Leading Australian economists, commentators and even political enemies have joined the federal Minister for Trade and Investment Craig Emerson in condemning Opposition plans to tighten control over foreign investment.

According to a discussion paper released this week, overseas investors seeking access to Australia’s vast agricultural resources will need to meet renewed standards for purchases over $A15-M instead of the current $A244-M threshold as set out by the Foreign Investment Review Board (FIRB).

All about containing China from rising.

The conservative Opposition Leader Tony Abbott insists the coalition is not opposed to foreign investment in Australia.

“We need it, we want it, it is essential for our continued national prosperity,” he told reporters in Sydney Saturday.

The Opposition’s dramatic reversal has sounded the alarm bells across both Australia’s public and private sectors, with many commentators fearing a strain of economic xenophobia is infecting Australia’s conservative policy makers.

Mr. Emerson said that an ugly precedent was set by Mr Abbott ‘ s speech in Beijing last week, a speech clearly orchestrated to highlight Chinese investment.

Mr. Emerson said, “Mr Abbott said he would not want anyone to think that the Coalition was hostile to foreign investment, but then he flew into China on his first visit to the country and announced that foreign investment by a government or state-owned enterprise would ‘rarely be in Australia’s interest.”

“Since returning to Australia from China, Mr Abbott has proposed a dramatic tightening of rules on foreign investment, particularly in the rural sector, that would apply to China and to other countries with which Australia does not have a free trade agreement.”

If a Coalition government is elected, foreign investors will be required to detail any official influence in their operations as part of a national register of foreign ownership.

Australia has immense agricultural resources, stunning potential but almost no capital. The problem is that demographically Australia is the most conservative country and the least open to FDI. The irony is that the greatest majority of FDI comes from New Zealand, the US and Europe, not from China.

Under a proposal in the Coalition paper, for purchases of agricultural land, the threshold at which the FIRB would become involved would be dropped immediately to $A15-M for either a single purchase or cumulative purchases.

As Mr. Abbott struggles with the task of containing brittle internal divisions between Liberals and Nationals over foreign investment, leading Australian economists fear closer ties with Chinese business could be the major casualty of domestic politicking.

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Australia has immense agricultural resources, stunning potential but almost no capital. The problem is that demographically Australia is the most conservative country and the least open to FDI. The irony is that the greatest majority of FDI comes from New Zealand, the US and Europe, not from China.

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China has become Australia’s key trading partner surpassing over US$110-B in annual 2-way trade, the total Chinese investment represents less than 1% of Australia’s total foreign investment.

Tim Harcourt, special adviser to South Australian Premier Jay Weatherill said that a contraction in Chinese investment would be a disaster for Australia’s patchwork economy.

“So many Australian jobs from coal mines in the Hunter Valley to agribusiness projects in Central Queensland have been saved by Chinese FDI.. Mr Abbott is pandering to local economic populism by punching the panda. His comments are not in Australia’ s national interest.”

The concern that a bias against Chinese investment is being nurtured to win votes has put the business community from Perth to Sydney on high alert.

The hysteria caused by Mr Abbott’s proposal continues to attract criticism from both sides of politics with former Liberal minister Peter Reith claiming changes to the FIRB would damage Australia’s international reputation saying the plan was “just crazy, stupid politics”.

Mr. Abbott, Shadow Treasurer Joe Hockey, or Deputy Opposition Leader Julie Bishop did not respond to requests for an interview or response.

Mr. Harcourt, whose best-selling book The Airport Economist championed Australia’s economic integration with Asia, believes Australia’s leaders need to stave off a creeping economic nationalism undermining the foreign investment that has been the lifeblood of Australia’s economy for more than a century.

One of the problems he identifies is a lack of public understanding. Mr. Emerson says this is a case of ‘perception not matching the reality’.

“China would not be one of Australia’s largest sources of inbound direct investment if there were any bias against Chinese investment.

“The Gillard Government has made it clear that it welcomes foreign investment, including from China, and has a balanced and credible assessment of our national interest. This provides confidence for the investor that the Australian Government will stand behind approved proposals, and ensures a sound public understanding of the benefits.”

“Some $A19-B in Chinese investment in Australia last year alone suggests Chinese business community knows Australia is a stable and welcoming place to invest.”

But the race to supply the Chinese economic juggernaut with the resources and partnerships it needs is far from a 1-Horse affair. Canada, Brazil, and many developing relationships across Africa and Asia are breathing down one another’s necks.

With conservative economic policies causing a storm at home, the last thing Australia needs is to allow the “Race Card” to once again tarnish its regional reputation.

Mr Abbott’s adversarial posturing may already have inflicted some damage on Australia’s relations with China.

Source: Live Trading News

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Publisher’s NOTE: This is another blow to diplomacy since Australia got busted over their secret plans of war with China dictated by USA. The plan was ripped off the pages, but it was leaked. China found out. Australia has tried to iron out their embarrassment, but distrust is there. This is not helping to build trust. – LMJS

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