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Chinese Investment in Australian Primary Industries Peter Drysdale Crawford School of Economics and Government , ANU ABARES Outlook Conference, Canberra, 1 March 2011
Context • commodities boom and shift in terms of trade • rise of China and India: industrialization, trade, rapid growth in resource dependence • scale of resource demand and investment: impact on economy and other sectors (like farming) • growth of Chinese ODI: direct, indirect investment, other sectors: Japanese precedent • policy response: state and customer ownership
Role of FDI in the primary sector • integration and FDI in resource sector • importance of FDI to industry strength • China’s early, large investments in Australia • drivers of Chinese FDI: competitiveness and security (eg. Chinalco; Sinosteel; Minmetals) • drivers in China: security, diversification • targets: agri-business; livestock; dairy; sugar • farm sector gains from capital, market links • early days: institutions, learning, sophistication • real estate, land issues
Issues • FDI by buyers of exports: transfer pricing? • SOEs (resources) or ‘dragon head companies’ (agriculture): evolution of Chinese enterprise • modest overall Chinese stake; growing rapidly • US, UK, Japanese precedents and response • China largest new global source of FDI • Australia’s robust market institutions: FIRB • two-way engagement by Australia and other partners; evolving institutions in China • getting national policy strategies right