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Page last updated at 08:43 GMT, Friday, 25 September 2009 09:43 UK

Australia seeks investment limits

Yandicoogina mine, Western Australia
Rio Tinto's rejection of a Chinalco bid in June strained ties.

Australia has said that it welcomes the booming Chinese investment in its economy but prefers foreign stakes in big mining companies to stay under 15%.

Investments in new ventures should be under 50%, said the investment review board's director, Patrick Colmer.

He said China was the third-largest investor in Australia, after the US and Britain, and would likely go higher.

China-Australian relations have been fraught in recent months after a string of both business and political spats.

Mining company Lynas said a Chinese firm pulled out of a multimillion-dollar investment on the news.

Mr Colmer, the head of the Foreign Investment Review Board (FIRB), which studies investment applications and makes a recommendation to the treasury.

Sensitive

But though welcoming of more investment, Mr Colmer said Australia was looking for "true commercially focused" deals and preferred an early and co-operative engagement on significant projects.

"Talk with us early... and deal with us the way we like to deal with you, which is in confidence," he said.

A number of Chinese bids are currently before the FIRB, including a $2.8bn (£1.75bn) offer from Yanzhou Coal for Felix Resources, which would be the largest-ever takeover of an Australian company by a Chinese state-run firm.

Earlier this week, the Australian military rejected a proposal from Chinese steelmaker Wuhan Iron and Steel Co. (WISCO) to gain access to a mining project on the sensitive Woomera weapons testing range.

Australian treasurer Wayne Swan rejected a similar bid by China's Minmetals for OZ Minerals in March because its flagship Prominent Hill project was in the Woomera zone.

Petrochina worker
PetroChina has agreed a huge Australian gas-purchase deal.

The new guidelines appearing to limit Chinese investment in Australia's mining sector were criticised by analysts as likely to raise tensions with China just when mining companies are seeking fresh funds.

The FIRB, which advises the treasurer, also blocked a proposal by China Nonferrous Metal Mining (Group) Co. to buy a 50.6% interest in Lynas Corp, which needed the $400m to develop the world's largest rare earth deposit.

The Chinese refused to shrink their bid, pulling out of the deal instead.

An analysis carried out for the Financial Review newspaper in Australia suggested that Asian investment in commodities-rich Australia surged almost 40% to $17.5bn in the year to June, led by Chinese mining acquisitions.

In June, China's state-owned Chinalco made an unsuccessful bid for a $19.5bn tie-up with mining giant Rio Tinto.

Weeks later, a Shanghai-based Australian executive with Rio, Stern Hu, was detained by Chinese authorities for alleged spying, later downgraded to industrial espionage.

Tensions stayed high following Australia's welcome of exiled Chinese Uighur Muslim activist Rebiya Kadeer last month, and the screening of a film about her at a Melbourne film festival.



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