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Date Posted: 06:12:56 07/24/12 Tue
Author: Australia's Abbott Says Chinese Investment Complicated (Leo Patrick One dollar46)
Subject:

411ReleasedBlackFridayLondonOllympicsSpecialEffective17thJulyto30thJuly2012

Australia's Abbott Says Chinese Investment Complicated
24/07/2012 5:21PM

By Enda Curran

SYDNEY--Australia's center-right opposition leader Tony Abbott on Tuesday described investment from China as "complicated" and said he opposes foreign governments taking a controlling stake in an Australian business.

The remarks by Abbott, whose Liberal-National coalition enjoys a big lead in opinion polls, underscore that if elected as Prime Minister his government would scrutinize investment from China, much of which comes from state-owned entities.

"Chinese investment is complicated by the prevalence of state-owned enterprises," Abbott said in a speech in Beijing. "It would rarely be in Australia's national interest to allow a foreign government or its agencies to control an Australian business," he said.

China's buying in Australia is centered on the resources and minerals sectors. Earlier this year Yancoal Australia, the local unit of Yanzhou Coal Mining Co. (YZC), became the biggest Chinese company ever listed Down Under. It had just merged with Gloucester Coal Ltd., having made a A$3.5 billion purchase of Felix Resources Ltd. in 2009.

But investment from China hasn't been without controversy. Some lawmakers and farmers complain that the country's food security is being threatened by Chinese mining companies buying large swathes of farmland across the rich pasture land of rural New South Wales state.

And tough restrictions have been placed on some Chinese acquisitions, including requirements to list locally and maintain a corporate presence in Australia.

In the 2010-2011 fiscal year, China was the third largest source of inward investment into Australia, behind the U.K. and U.S., which remains the biggest foreign buyer here. Some A$15.0 billion in approved investment came from China compared with A$27.6 billion from the U.S.

Investment into Australia is policed by the Treasury department's Foreign Investment Review Board which applies a so-called national interest test and examines any deal over a A$244 million threshold. Foreign governments need to win approval regardless of the size of investment.

Outright rejections of proposed takeover deals are rare. In 2011 the government, on advice from FIRB, blocked Singapore Exchange Ltd.'s (S68.SG) proposed takeover of main stock market operator ASX Ltd. (ASX.AU) saying the 8.4 billion Australian dollar (US$8.9 billion) bid failed the national interest test.

That rejection was followed months later by the green light for SABMiller PLC's (SAB.LN) 9.9 billion Australian dollar (US$9.8 billion) bid for fellow brewer Foster's Group Ltd.

"To maintain public support for foreign investment, Australians need to understand that it is clearly in our national interest; just as investors need to be confident that Australia remains a good place to invest that's not subject to sovereign risk," Abbott said in his speech.

In what would be the biggest Chinese foray overseas yet, on Monday oil company Cnooc Ltd. (CEO) unveiled a $15.1 billion pact to acquire Canada's Nexen Inc. (NXY). That deal will be subject to regulatory and political scrutiny in commodity rich Canada, a country with a similar outlook on foreign investment as Australia.

Some key corporates in Australia are effectively ring fenced. A 'four pillars' policy makes any takeover of the country's biggest four lenders unlikely, foreign shareholders aren't allowed to hold a majority stake in Qantas Airways Ltd. (QAN.AU) and any stake above 15% in ASX Ltd. needs the approval of parliament.

Mergers and acquisition volumes in Australia reached almost US$50.0 billion during the first six months of the year, down 33% compared with a year earlier and the lowest level since the first half of 2009 according to data provider Dealogic.

-Write to Enda Curran at enda.curran@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

July 24, 2012 03:21 ET (07:21 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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