Investment barriers stuff-up China relations

The Rudd gov­ern­ment is not, of course, the inven­tor of the dam­ag­ing ‘Star Cham­ber’ pro­ce­dures of the For­eign Invest­ment Review Board. But it appears to have sub­mit­ted will­ing­ly to the FIRB’s expen­sive and utter­ly use­less sanc­tions on the life­line of our exter­nal accounts—foreign invest­ment.

Xeno­pho­bia” is a ready expla­na­tion, but not a com­plete­ly sat­is­fac­to­ry one (Stephen Kirchner’s excel­lent update of Wolf­gang Kasper’s clas­sic Cap­i­tal Xeno­pho­bia has a more sophis­ti­cat­ed analy­sis). Since Chi­na accounts for just 1% of the flow of for­eign invest­ment to Aus­tralia (see ABS data here, extract­ed below) fear of for­eign own­er­ship does not explain why a labor gov­ern­ment should now erect bar­ri­ers over the bridges built by the con­ser­v­a­tive Howard gov­ern­ment.

I think the truth is that they had no set­tled inten­tion of doing so but allowed events—including weeks of media innuendo—to lead them where they nev­er intend­ed to go. This is mere­ly a sutff-up; an unin­tend­ed slight to a neigh­bor that we may long regret. Here is Simon Cre­an, now Trade Min­is­ter, then Leader of the Oppo­si­tion, wel­com­ing Chi­nese Pres­i­dent Hu Jin­tao before his address to a joint sit­ting of Par­lia­ment in 2003:

“…As Chi­na seeks to ful­fil its des­tiny as a leader in region­al and inter­na­tion­al coop­er­a­tion, no coun­try is bet­ter placed to assist it and encour­age it than Aus­tralia. This is some­thing on which there is bipar­ti­san agree­ment. That is why my first over­seas vis­it as oppo­si­tion leader was to your coun­try. I am delight­ed that our rela­tion­ship is gain­ing new strength, and I want to turn it to our mutu­al advan­tage. Mr Pres­i­dent, we are old friends, but there are unlim­it­ed oppor­tu­ni­ties for new part­ner­ships. It is in the spir­it of good­will, the pur­pose of peace and friend­ship and the deter­mi­na­tion to be part­ners in the devel­op­ment of our region that I join the Prime Min­is­ter in the warmest of wel­comes to this par­lia­ment of the peo­ple of Aus­tralia” Extract from Hansard, empha­sis added

It’s time to give sub­stance to this pledge by abol­ish­ing the point­less FIRB inqui­si­tion and doing what we know we should do: wel­come those “unlim­it­ed oppor­tu­ni­ties for new part­ner­ships”.

Chi­nese invest­ment (flows)
($mil­lions, ABS 53520, May 2009)
2005200620072008
Chi­na share of total (%)0121
For­eign invest­ment in Aus­tralia301,2812,6821,887
Direct invest­ment in Aus­tralia-58244232,597
Direct invest­ment in Aus­tralia, Equi­ty cap­i­tal and rein­vest­ed earn­ingsnpnpnpnp
Direct invest­ment in Aus­tralia, Oth­er cap­i­talnpnpnpnp
Port­fo­lio invest­ment lia­bil­i­tiesnpnpnpnp
Port­fo­lio invest­ment lia­bil­i­ties, Equi­ty secu­ri­ties--npnp
Port­fo­lio invest­ment lia­bil­i­ties, Debt secu­ri­tiesnpnpnpnp
Finan­cial deriv­a­tive lia­bil­i­tiesnpnpnpnp
Oth­er invest­ment lia­bil­i­ties-2807272,477-978
Total all coun­tries37,235172,902160,044148,998

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