Chinese investment needs Australia’s positive attitude

17  January 2013

SYDNEY — Australia needs to cultivate a “pick up the phone” mentality when it comes to dealing with China and keeping up with its international competitors for Chinese investment, according to a new research.

A paper from the Australia China Business Council is certain to place further pressure on the Australian government after revealing that Australia is losing ground as a destination for Chinese investment.

The report, to be released in Sydney on Friday and led by foreign investment expert Qian Jinming and former UBS China president John Larum, shows Australia’s chief competitors Canada and the United States are increasingly capturing a larger share of Chinese merger and acquisition transactions and generating a more significant ‘deal flow’ than Australia.

Not only does the report identify the importance of Chinese FDI flows into Australia but also emphasizes the need for more cut – through communication at the governmental and bureaucratic levels.

“Stronger linkages should facilitate a more active approach to communication of investment policy changes to China – a ‘pick up the phone’ mentality, giving advance notice or early explanation of Australian government policy or statements. This could have helped to ease tensions in the past when new policy or guidelines were announced that were seen by China as discriminatory.”

Australian federal government has come under fire from both sides of Australian politics as well as Chinese business leaders after Chinese telecommunication giant Huawei was barred from bidding on National Broadband Network contracts and the Foreign Investment Review Board was accused of bias against Chinese investors.

According to the report, there are still things that the Australian Government can do to reduce perceptions that it does not welcome Chinese investment.

“Given that there is broad consensus about the importance of foreign investment, including from China, there is a strong national interest in doing so, especially when other countries may be relaxing their foreign investment regimes,” the report notes.

Former official of Chinese Ministry of Commerce, Qian Jinming recommends building deeper connections between the Australian Treasury Department, within which the FIRB sits, and Chinese investment-related authorities as well as influential academics and think tanks.

ACBC chairman Frank Tudor told Xinhua that the paper, aside from seeking a swift conclusion to FTA negotiations, encourages greater cooperation in infrastructure and agriculture as a direct way of demonstrating to the community the benefits of Chinese investment.

“This paper highlights perceptions of discrimination against Chinese investors as something of a contributing factor to the relative decline of deal flow,” Tudor said.

Government communication and engagement is seen as the key to further assuaging investment tension.

The Treasury and China’s National Development and Reform Commission already have a High Level Economic Dialogue, although this falls short of a higher level ‘Strategic and Economic Dialogue’, such as that between the United States and China.

The report suggests formalizing the Australia China Economic and Trade Cooperation Forums at a government to government level would also be a positive, including by allowing more exposure of Chinese SOEs to Australian government Ministers and officials.

Among the recommendations made to the Australian government are more market-oriented reforms for Chinese SOEs, a greater communications blueprint in China from FIRB and streamlined corporate governance regulation through agencies such as the Australian Taxation Office and Australian Securities and Investment Commission.