From Bloomberg, March 20 2009, China dismisses retaliation fears over Coke decision:
China dismissed concerns its rejection of a Coca-Cola Co acquisition will prompt retaliation, as an Australian lawmaker said the move supports his campaign to block a $19.5 billion Chinese investment in Rio Tinto Group.
“No, I’m not worried,” Vice Commerce Minister Chen Jian said at a briefing in Beijing today, when asked whether other nations would block Chinese investment. “We made our decision based on our antimonopoly law. Other countries have their laws and regulations which they will follow.”
We’re not suggesting any tit-for-tat going on in proposed deals over juicemakers, softdrink companies and mining and metals companies – oh no.
But the timing of the latest decision by the Australia government’s Foreign Investment Review Board to delay its 90-day review process of China’s Minmetal’s proposed takeover of Oz Resources – and other developments since China’s Commerce ministry rejected Coke’s proposed acquisition of the country’s leading juicemaker Huiyuan Juice – does seem rather, err, questionable.
As the FT reports on Tuesday, the FIRB’s latest move means effectively every one of China’s proposed investments in Australia’s resources sector is now under extended official scrutiny and remains on hold:
Australia has extended its review of Beijing-based Minmetals’ A$2.6bn (US$1.8bn) cash takeover of Oz Minerals by up to 90 days in a blow to the cash-strapped zinc and copper mining group’s efforts to secure a deal quickly.
The decision by the Foreign Investment Review Board (FIRB) comes after the regulator also extended its review period of other Chinese investments in Australia, including Chinalco’s planned $19.5bn capital injection into Rio Tinto, and Hunan Valin Iron and Steel’s proposed A$1.2bn investment in Fortescue Metals.
In deferring its review process on the Minmetals-Oz Minerals deal in particular, the FIRB and the Australian government would have known they were putting cash-strapped Oz Minerals “at severe risk of failure”, notes Stephen Bartholomeusz at BusinessSpectator on Tuesday:
With its banking facilities due for repayment at the end of the month the company would have made it very clear to the government that failure to gain early approval would leave its fate squarely in the hands of its bankers, who can get their money out quite quickly by carving up the asset-rich group and flogging it off.
So, despite the prospective large-scale loss of jobs and investment, what’s behind FIRB’s foot-dragging? The cynics, as Bartholomeusz notes, “would say it has been frozen by the complexity and sensitivity of the policy considerations – and the politics of them – confronting a government and economy that needs to engage with China”.
The “other” explanation, however, is that it is precisely that need to engage that could be used to rationalise the decisions to put all the major Chinese investment proposals on ice:
Kevin Rudd and his government want a trade agreement with China. It also appears that Rudd wants something more than that – a deeper engagement. He’s been promoting a deeper involvement by China in the world’s affairs, including a larger role in global economic forums and institutions. In the current global economic and financial environment, what leverage does Australia have in a negotiation with Beijing? None … except access to our rich resource base.
The alternative explanation, in Bartholomeusz’s view, is that FIRB is “simply dithering” while it searches for a policy framework, while appealing to those with a low opinion of elements of the local bureaucracy. That is, perhaps, an even weaker reason. Mind you, he says, “it is appealing”.
But wait, there is a far simpler – and cruder – reason, summed up in the tit-for-tat approach of Senator Barnaby Joyce.
The FIRB’s decision to delay its Minmetals-Oz Minerals review comes just after the Australian government last week launched a Senate inquiry into investments made by state-owned groups and sovereign wealth funds.
Joyce, a National party senator, spearheaded efforts to establish the inquiry as part of his drive to galvanise opposition to the Chinese investments. In fact, Joyce last week appeared in a privately-funded TV advertisement expressing his opposition to the Oz Minerals takeover.
Alongside the slogan: “Keep Australia Australian”, Joyce warns about Australia’s “source of wealth” being bought by a foreign government. This week, Joyce told the FT he welcomed China’s decision to reject the Coca-Cola deal:“The rejection of Coca-Cola gives me plenty of ammunition to articulate my belief that our concerns [about the Chinese investments] have nothing to do with being parochial,” he said. “The sentiments being expressed in Australia are the same as the ones the Chinese have expressed in their rejection of Coca-Cola.”
Related links:
China dismisses retaliation fears over Coke decision – Bloomberg
China blocks Coke’s bid for Huiyuan Juice - FT
Australia extends review of Oz Minerals deal – FT
Holding out on China - Stephen Bartholomeusz, BusinessSpectator
China’s land grab smacks of a regime in disarray - FT Alphaville
China’s shopping spree riles the People’s Republic of Oz - FT Alphaville