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CHINA TO BY-PASS AUSTRALIAN INVESTMENT REGS TO BECOME A MAJOR WORLD PLAYER IN IRON ORE

NOT TODAY DEAR CHINA, I THINK I HAVE A HEADACHE-SWAN

TREASURER Wayne Swan appears that he may soon have another foreign investment headache on his hands, as a Chinese entrepreneur says he has Beijing’s backing to step around Australian investment rules and become the world’s fourth force in iron ore.

Liu Han, chairman of the sprawling Hanlong conglomerate, has told local media that the Chinese government and its banks were backing his ambitious overseas investment plans including a takeover bid for the Australian-listed iron-ore hopeful Sundance Resources.

He claimed his Hanlong Group would become one of the world’s top four iron-ore producers within 10 years. This would give China ”a say” in iron-ore price negotiations and stem as much as $80 billion in national losses flowing to the big producers, he said.

But despite a generous credit line from China’s Export-Import Bank, and his claim to be pursuing national strategic rather than private commercial objectives, Mr Liu says his status as a private entrepreneur will enable him to step around Australian foreign investment rules.

”Every company in Hanlong Group is private,” reported China Business News, paraphrasing comments from Mr Liu. ”Australia is a rule-of-law country, the Australian Government doesn’t have a law that can resist these takeovers.”

The comments may complicate the foreign investment approval process for possible future investments by the Hanlong Group and other private Chinese companies in Australia, although the Sundance bid is unlikely to raise serious concerns because the primary assets are in Africa.

The $1.3 billion Sundance bid was lodged by Australian-registered Hanlong Resources, whose parent company is the privately held Sichuan Hanlong Group.

Chinese state-owned enterprises have so far accounted for an overwhelming majority of China’s overseas resource investments. The investments have caused bilateral tensions since Chinalco’s complex $US19.5 billion bid for a stake in Rio Tinto in 2009.

After the bid failed, a Chinese internal post-mortem acknowledged international suspicion of state-owned entities and recommended greater assistance and funding for Chinese private entities to achieve Chinese strategic goals.

”When state-owned enterprises ‘go out’ they will face the problem of their government background,” said the report prepared for the State Council by the Development Research Centre, as revealed by BusinessDay in March 2010.

”Therefore it is … necessary to encourage private capital to go out in the field of natural resources,” it said.

The Australian Foreign Investment Review Board’s stated preference for private investors can be difficult to apply to China, where the state-private divide is not always clear-cut. All large successful private companies require a degree of symbiosis with relevant tiers of the Chinese Government – or they at least must pay lip service to government objectives – in order to protect themselves and pursue their own interests.

Liu Han told China Business Times that the powerful National Development and Reform Commission had confirmed its support for Hanlong’s overseas development. Mr Liu also said ”money is fundamentally not a problem” thanks to funding from several sources, including the Export Import Bank, and that he would be prepared to on-sell shares to other domestic companies if his bid succeeds. He said Hanlong aimed to ”solve the long-term demand and supply problem in the iron-ore market” and thereby stem what he said was $70-80 billion in annual losses that are flowing to the three iron ore giants, Vale, Rio Tinto and BHP Billiton.

Sundance had planned a two-stage $7.7 billion iron ore project in Cameron and Congo. Hanlong claims the mine could provide up to 200 million tonnes of iron-ore imports to China each year.

August 5th, 2011
Topic: MINING OIL GAS, POLITICS PARLIAMENT Tags: , , , ,

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