The Albanese government has quietly approved China Baowu Steel Group’s involvement in a $2bn iron ore project in Western Australia, the biggest Chinese investment to be given the green light by Canberra since 2019.
The Weekend Australian can reveal the state-owned Chinese steel giant’s joint venture with Rio Tinto was recently approved by the Foreign Investment Review Board, Canberra’s most secretive regulator.
Approval for Baowu’s $1bn almost half stake in the Western Range iron ore project ends an investment strike ordered by Beijing after the Morrison government’s April 2020 call for an inquiry into the origins of Covid.
A Treasury departmental spokesman said the government would not comment on the politically sensitive decision. “The Australian government reviews foreign investment proposals case by case to ensure they are not contrary to the national interest.
We do not comment on the application of reviewing arrangements as they apply or could apply to a specific case,” he said.
Sources familiar with the transaction said the foreign investment regulator had given its approval.
The decision – which was waved through by Jim Chalmers – sends a clear signal to Chinese investors that big projects in Australia can still be approved if they pitch with local partners. Baowu has a 46 per cent stake in the project, and Rio 54 per cent.
It is the biggest Chinese investment approved in Australia since the $1.5bn takeover of infant formula maker Bellamy’s by China Mengniu Dairy Company.
Beijing’s diplomats in Australia have complained for years as the Turnbull and Morrison governments tightened rules on foreign investment and restricted Chinese investment in critical infrastructure.
Beijing was infuriated when then treasurer Josh Frydenberg blocked a $13bn bid for pipeline company APA Group by CK Infrastructure Holdings in 2018, Mengniu Dairy’s $600m takeover offer for Lion Dairy & Drinks in 2020 and China State Construction Engineering Corp’s $200m bid for construction company Probuild in 2021.
President Xi Jinping even raised his unhappiness with Canberra’s investment regime when he met with Anthony Albanese in Bali in November. “It is hoped that the Australian side will provide a good business environment for Chinese enterprises to invest and operate in Australia,” Mr Xi told the Prime Minister.
China’s Commerce Ministry repeated that call on Thursday. “It is entirely possible to find a mutually beneficial and win-win solution through dialogue and communication,” the Commerce Ministry’s spokeswoman said.
News of the investment approval will buoy China-focused Australian businesses hoping to get access to the world’s second-biggest economy.
It comes ahead of a trip by Trade Minister Don Farrell to China to meet in person with Minister of Commerce Wang Wentao.
Australian and Chinese officials are preparing to meet in the coming days as preparations continue before the visit.
China’s Customs last week cleared the first Australian coal in more than two years. The Shanghai-headquartered Baowu, a huge customer of Rio Tinto, BHP and Fortescue, bought the first shipment of Australian coking coal.
Beijing has also signalled it will partially unwind restrictions on the lobster and timber industries, as it relaxes trade blockages imposed in 2020 on exports previously worth $20bn a year.
The [Commerce] Minister himself told me last week that they had started reordering Australian timber products,” Senator Farrell told Sky News in a recent interview.
Expectations have risen in the Australian wine industry that a more than 200 per cent impost on their exports could be reduced after China’s Commerce Ministry recently said it was willing to discuss them. On Thursday evening, Treasury Wine Estates executive Tom King, who manages the group’s Penfolds label, gave the keynote address at the Australia China Business Council’s Canberra Lunar New Year dinner to an audience that included China’s deputy ambassador, Li Fanjie.
In another attempt to create goodwill ahead of Senator Farrell’s visit, Australia’s ambassador in China Graham Fletcher was this week given an audience with the governor of Sichuan Province, Huang Qiang.
“We welcome more Australian businessmen to invest and start businesses in Sichuan,” Mr Huang told Mr Fletcher, according to the party-state outlet Sichuan Daily.
The meeting was also reported by the social media account of the People’s Daily, the Communist Party’s top masthead.
The publicity underlines the new access being given to Australia’s top envoy in China, who was frozen out of almost all contact with senior Chinese officials throughout 2020, 2021 and the first half of 2022.
Chinese investment into Australia fell sharply as the bilateral relationship soured and as Beijing ordered Chinese firms to curtail extravagant acquisitions.
More than $10bn of Chinese investment was approved in 2017, according to research by KPMG and Sydney University. That dried up to $585m in 2021.
Despite the recent fall, only the US approved more investment from China than Australia from 2005 to 2022, according to a database maintained by the American Enterprise Institute.