China’s shopaholic activities Down Under (in less than a week, two Chinese state-owned companies have offered more than $20bn in total to buy into cash-strapped Australian miners) have prompted calls in Australia’s Senate for an inquiry into investments by Chinese state-owned companies, reports Bloomberg on Thursday.
Amid media jibes about the “People’s Republic of Oz”, opposition Nationals Senator Barnaby Joyce has proposed an inquiry to consider further tightening Australia’s Foreign Investment Review Board rules and Chinese sovereign investment in Australian resources. The committee has the power to summon executives from companies and to block investments, notes Bloomberg.
Chinalco, the Chinese state-owned aluminium group, last week agreed a $19.5bn investment in Rio Tinto – including the purchase of $7.2bn of convertible bonds and $12.3bn worth of stakes in Rio projects- while this week, China Minmetals made a $1.7bn takeover bid for Oz Minerals – a diversified miner formed last year through the merger of Oxiana and Zinifex.
Their proposed investments must be lodged with the review board, which will make a recommendation to Treasurer Wayne Swan, who has the power to reject both deals. Just days before the announcement of Chinalco’s deal with Rio, Swan moved to change the Foreign Acquisitions and Takeovers Act to allow for greater government oversight of such investments.
Joyce, meanwhile, is already claiming some vital support for his proposed inquiry, but needs solid backing from his Liberal-National coalition’s other 35 senators and from five Greens to begin the inquiry.
But the idea that Treasurer Swan would refuse permission for China Minmetals to buy Oz Minerals is “laughable”, noted BusinessSpectator’s Alan Kohler earlier this week. Australia, as he says, is in “no position to refuse China’s cash: a steady flow of foreign investment was necessary even in the best of times because of Australia’s persistent current account deficit; in the worst of times it is even more necessary”.
Not just that, for beleagured Oz Minerals, the alternative to a Chinese state-backed investment would be receivership – and soon, given its looming deadline to refinance A$1.2bn of debt by February 27.
Rio Tinto, also, obviously found itself between a rock (a rights issue the board clearly did not want) and a hard place (China) on its $19.5bn deal with Chinalco.
In terms of China’s agenda, it’s worth noting two sharp pieces in the Australian Financial Review published in the past week (posted on the Asian Eye table in FT Alphaville’s Long Room).
Related links:
Australia may hold inquiry into Chinese investments – Bloomberg
Minmetals makes A$2.6bn offer for Oz Minerals – FT.com
Oz Minerals trades at discount to Minmetals offer - Bloomberg
China’s resources swoop Down Under – Asian Eye, Long Room
People’s Republic of Oz – BusinessSpectator
Fun and games in the People’s Republic of Oz – FT Alphaville