Chinese foreign direct investment in Australia: policy issues for the resource sector1

Abstract

The past 18 months have seen Chinese foreign direct investment (FDI) in the Australian resource sector become an issue of policy interest. There are two big questions that the prospects of a significant rise in FDI from China into the Australian resources sector have raised. Is the surge of FDI into Australian mining and energy consistent with achieving the traditional gains from foreign investment? And are there any particular problems associated with investment from foreign state-owned enterprises or state-managed sovereign wealth funds? These are among the questions addressed in this paper. The paper argues that there are no issues that cannot be dealt with under the umbrella of the established test of ‘national interest’ in managing the growth of Chinese FDI into the Australian minerals sector. It argues that a confusion has been introduced into policy over the questions of state ownership and supplier–buyer relations in respect of Chinese investments and that clarifying these issues is likely to be important to Australia's capturing the full benefits from the growth of Chinese resources demand and longer term economic and strategic interests in China.