Urandaline Investments The Perils of Down Under：Chinese Investment in Australia

Urandaline Investments The Perils of Down Under: Chinese Investment in Australia Hong Kong University of Science and Technology Hong Kong September 2011 .MINING·METALS ELECTRICITY·PETROCHEMICALS·

U randauine Investments Who is Clive Palmer and why is he saying these things? The Australian government has racially discriminated against China) and stopped them from investing in Australia. They've brought in things like the Foreign Investment Review Board in Australia, which is an outstandingly racist legislation designed to slow down Chinese growth, and it's a national disgrace Clive palmer The australian 29 September 2009 ·MIN|NG· METALS· ELECTRICITY·PETR0 CHEMICALS·

2 Who is Clive Palmer and why is he saying these things? “The Australian government has racially discriminated against (China) and stopped them from investing in Australia…They've brought in things like the Foreign Investment Review Board in Australia, which is an outstandingly racist legislation designed to slow down Chinese growth, and it's a national disgrace” Clive Palmer The Australian 29 September 2009

U randauine Investments The facts do not support a racist policy which discriminates against Chinese investors In the past 4 years the FIrb has approved around 230 Chinese investments worth some $6o billion, one outright rejection and six with conditions >Over the last decade there were three high-profile rejections of which one was Anglo-Dutch, one Singaporean and one chinese ·MIN|NG· METALS· ELECTRICITY·PETR0 CHEMICALS·

3 The facts do not support a racist policy which discriminates against Chinese investors ➢ In the past 4 years the FIRB has approved around 230 Chinese investments worth some $60 billion, one outright rejection and six with conditions ➢ Over the last decade there were three high-profile rejections of which one was Anglo-Dutch, one Singaporean and one Chinese

U randauine Investments Chinese investors believe that australia discriminates against them Survey by australia's Lowy Institute found Chinese believe investment discrimination by Australia is driven by Media driven nationalism Perception that state related investors are not focused on commercial objectives Concerns about China as both owner and customer Concern with China's growing geo-political clout Such perceptions stem largely from the failure of a series of igh profile resource deals ·MIN|NG· METALS· ELECTRICITY·PETR0 CHEMICALS·

4 Chinese investors believe that Australia discriminates against them ➢ Survey by Australia’s Lowy Institute found Chinese believe investment discrimination by Australia is driven by: ➢ Media driven nationalism ➢ Perception that state related investors are not focused on commercial objectives ➢ Concerns about China as both owner and customer ➢ Concern with China’s growing geo-political clout ➢ Such perceptions stem largely from the failure of a series of high profile resource deals

U randaline Investments A serious policy debate, but we can still laugh We 51%15a bit much But we'l Just take the middle and you can keep the nice bits around the edge… usEof MINING· METALS· ELECTR|cITY· PETROCHEMICALS· 5

5 A serious policy debate, but we can still laugh

Urandaline Investments The topics and structure of this presentation Analyze the magnitude and structure of chinas overseas 1 direct investment in general and to Australia in particular Explain the workings of the FIrB and detail its track record 2 in approving and rejecting investment proposals Consider characteristics that make chinese investment 3 different to other foreign investment to Australia e Discuss the Chinalco Rio Tinto transaction as a case study to 4 better understand Australia's FDI policy

The topics and structure of this presentation 1 • Analyze the magnitude and structure of China’s overseas direct investment in general and to Australia in particular 2 • Explain the workings of the FIRB and detail its track record in approving and rejecting investment proposals 3 • Consider characteristics that make Chinese investment different to other foreign investment to Australia 4 • Discuss the Chinalco Rio Tinto transaction as a case study to better understand Australia’s FDI policy

U randauine Investments Key facts relating to China's overseas direct investment China's odl has increased in recent years, but is still 1 much smaller than FDI(bigger recipient than investor) e Australia is the largest beneficiary of China's overseas direct investment e Mineral resources are the largest part of China's 3 Australian ODI, but this is not the case overall e China has encountered problems in countries other than Australia and usually with natural resource investments ·MIN|NG· METALS· ELECTRICITY·PETR0 CHEMICALS·

7 Key facts relating to China’s overseas direct investment 1 • China’s ODI has increased in recent years, but is still much smaller than FDI (bigger recipient than investor) 2 • Australia is the largest beneficiary of China’s overseas direct investment 3 • Mineral resources are the largest part of China’s Australian ODI, but this is not the case overall 4 • China has encountered problems in countries other than Australia and usually with natural resource investments

Urandaline Investments Over time. China has attracted far more FD/ than OD/ $120 00 $80 U$60 40 20 0 20032004200520062007200820092010 口FD|■0D

Over time, China has attracted far more FDI than ODI $0 $20 $40 $60 $80 $100 $120 2003 2004 2005 2006 2007 2008 2009 2010 Value (US$ billion) FDI ODI

U randauine Investments Official data would suggest Australia is a very minor beneficiary of China's OD/ % o 20032004200520062007200820092010 ·MIN|NG· METALS· ELECTRICITY·PETR0 CHEMICALS·

9 Official data would suggest Australia is a very minor beneficiary of China’s ODI 0% 1% 2% 3% 4% 5% 2003 2004 2005 2006 2007 2008 2009 2010 Share of China’s ODI

U randauine Investments Australia is ahead of all other countries in attracting Chinese overseas direct investment 400 c$300 $200 $10o 0 Australia USA Nigeria Iran Brazil Canada Other Heritage Foundation 2005-10 ·MIN|NG· METALS· ELECTRICITY·PETR0 CHEMICALS· 10

10 Australia is ahead of all other countries in attracting Chinese overseas direct investment $0 $100 $200 $300 $400 Australia USA Nigeria Iran Brazil Canada Other FDI (US$ billion) Heritage Foundation 2005-10