Communist Party of Australia

The announcement made recently that China’s government-owned aluminium company Chinalco is applying to buy a $30 billion percent stake in Rio Tinto’s Australian operations has prompted a hysterical response in some quarters. The investment – and other smaller proposed deals involving other Chinese state owned enterprises – is being portrayed by the usual culprits as an assault on our national interest by sinister forces taking advantage of current discounted asset prices and the low value of the dollar.

Treasurer Wayne Swan will have to determine whether the application presently before the Foreign Investment Review Board should be considered like that of any other company or as direct investment by a foreign government. In this case the government in question is that of the People’s Republic of China, which is headed by the Communist Party of China. It is these two facts that have uncorked a torrent of xenophobia and red baiting in the usually sober financial pages.

Aside from the accusation of exploiting Australia’s delicate economic situation to acquire “our” assets, the Chinese companies stand accused of plotting to depress world commodity prices. This is, the anti-China lobby claims, the objective of the alleged drive undertaken by Chinese investors. The Chinese national interest is said to be solely the supply of cheap raw materials to feed the factories of “Team China”.

All sorts of distortions of the usual market mechanisms are said to threaten if the Chinese are allowed to take a seat at the investment table like all the other nations. The executives of China’s state owned enterprises are government-appointed. They will look to protect China’s overall economic position rather than maximising their own profits at all costs. A management of this sort couldn’t possibly be as competent as the more usual grossly over-rewarded profit hounds, the critics claim. While corporate heads are quietly assumed to have conservative political leanings or affiliations, much is being made of Chinalco chairman Xiao Yaqing’s membership of the Communist Party.

It seems even some in the trade union movement have bought the anti-China line. AWU national secretary Paul Howes and CFMEU Mining and Energy Division president Tony Maher said the government needed to reintroduce export licences to prevent a raid on Australia’s resources through overproduction, which would force commodity prices down.

It’s time for commentators to take a breath and check their biases. Paul Howes and Tony Maher are right to demand that the Australian government should take back the levers over the economy it abandoned over the past few decades. But why raise the complaint now? Japanese companies have considerable investment in Australia. In fact they share ownership of the Robe River iron ore operations with Rio Tinto.

Mitsui owns 33 percent, Nippon Steel owns 10.5 percent and Sumitomo Metal Industries holds a 3.5 percent stake. Sure they are private companies, huge and influential corporations in fact. It is strange that trade union officials appear to be arguing that it is okay for companies to own governments but improper for governments – acting the interests of their people – to own companies. It is precisely the privately owned resource companies that have shown themselves to be prone to underhand tactics, manipulating prices through transfer pricing, etc.

China has had investments in iron ore and aluminium smelting in Australia since the 1980s.

Two final points to note are that the Chinese have not been offered and are not seeking controlling interests. How do they propose to undermine the price of “our” resources? The other fact is that the companies seeking a cash injection from Chinese sources invited them to take a stake. The head of China’s $200 billion sovereign wealth fund was a guest of his Australian counterpart, Future Fund chairman David Murray, not the other way around.

The truth is that there is no Chinese plot to raid cheap assets in Australia. Australian companies are chasing Chinese investment because the sources from capitalist countries are drying up. The current circumstances in which a socialist country has money to spend on lifting the living standards of its own people and invest in overseas projects while the heads of corporations in capitalist countries are obliged to go cap in hand for to governments for bail out packages will be noted by the people of the world. They will draw their own conclusions about which is the more efficient system.

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