Resources, not Tibet or torches, likely to dominate the 'Mandarin Auzzie's' Beijing agenda

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Tomorrow marks a very interesting time politically for one of China's most important regional partners. Australian President Kevin Rudd will arrive here tomorrow to meet with his Chinese counterparts, the last leg of his first major international tour. Rudd and Hu.jpg And while the western media here is going to be focused on Rudd's thoughts on the torch relay and the situation in Tibet and the Chinese media is going to be focused on Rudd's support for the Olympics in China and his reiteration of support for the 'one-China policy,' one of the key challenges for the new Prime Minister, which is highly likely to go untalked about, is going to be the unsexy, but highly critical issue of Chinese investment in his country's resource sector.

I suspect that politically speaking, Mr. Rudd finds himself in a somewhat precarious situation when it comes to China right now thanks to natural resources. As most people are quite likely aware, Mr. Rudd - though new on the international political stage - is considered to be an old China hand. Given that he was a former diplomat here in China and speaks fluent Mandarin, there was quite a bit of buzz in China surrounding his election. As such, I suspect many people inside and out of government here in China are expecting Mr. Rudd to be somewhat pan-sympathetic to China's concerns on both a political and business front. And while he'll undoubtedly put on an impressive display in front of the cameras, say the right things and wow the Chinese media with his ability to take questions in Mandarin, behind the scenes is going to be a different story.

One must not forget that first and foremost, Mr. Rudd is an Australian politician that has to put both his country's interests, and his supporter's interests, ahead of what the Chinese government may be expecting of him. Though Mr. Rudd is considered somewhat on the right-side of the spectrum when it comes to his political leanings within his own party, Mr. Rudd was elected as the leader of a party which has strong union support within Australia, and is generally left-of-center. As such, if he wants to maintain his core support in Australia through his term in office, he's going to have to be cognizant of their concerns. And, undoubtedly, one of the issues concerning the union movement in Australia has to be China's recent moves toward acquiring more interests in Australian-based resource firms.

Mining.jpg The most recent example is Chinalco's February move to acquire a 9-percent stake in mining giant Rio Tinto. While 9-perecent might not seem like much, Chinalco has been making rumblings about acquiring more stake in the company. Perhaps this is why Australia's Resource Minister was quoted earlier this week as saying that his government had a responsibility "to maximize returns for Australia as a nation."


Everyone knows that China is sucking up energy and natural resources faster than an Auzzie can go through a jar of Vegemite. But if Beijing is expecting Mr. Rudd to open the flood gates when it comes to plucking his country's natural resources because he knows China, it may be in for a bit of a rude awakening.

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5 Comments

cc said:

Perhaps the ongoing FTA negotiation is one of the top items.

Paul said:

@CC:

There's no doubt that the stalled FTA negotiations will be discussed. However, speaking to an Australian analyst about this, he pointed out that the Rudd government has yet to outline its international trade policy. And because of that, there's some question about whether that administration is going to opt for a bilateral or multilateral approach. As such, I'm going to guess that the Rudd government is going to drag its feet on an FTA with China for a while.

Australia will keep dragging its feet? Not likely now that New Zealand just signed an FTA with China. That will put pressure on Rudd to "level the playing field" for Aussie exporters to China.

cc said:

Paul,

I seems rationale to me that the Aussies should follow the bilateral (not giving up multilateral) approach.

I see a significant, long-term lasting impact of the Kiwi FTA with China as far as the trading relationship between China and the rest of the world is concerned, though its short term impact is quite limited. In this regard, I am not sure if the Aussies are going to take a wait-n-see apporach in the short-term.

Paul said:

@chriswaugh_bj:

With the Kiwi FTA, there may well be some added pressure on the Rudd government to get things moving. However, there are a couple of beefs that Australia has with China that don't really relate to New Zealand's situation. One is related to imports of raw materials by China that have -- for lack of a better term -- blocked because of increased commodity prices recently. The other issue relates to the service sector and labor costs. That said, I do think an Australian FTA with China is virtually inevitable. But what form it takes is the larger question mark. With that in mind...

@CC: I will agree with you that the NZ FTA will be good for China overall, though the impacts to China will be limited. (not so sure about the overall impact on New Zealand, however) But, as I mentioned before, the Rudd government has yet to outline its international trade policy. And with increased pressure from the Australian population on the government to make it more of a regional and international player, I have to wonder if the Rudd administration won't instead decide to develop a multilateral approach in an effort to play a larger role on a regional basis when it comes to trade, and subesequently, politics as well.

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