1. Chinese Investment in Australian Primary Industries Peter Drysdale Crawford School of Economics and Government, ANU ABARES Outlook Conference, Canberra, 1 March 2011

2. 2 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

3. 3 FIRB approved Chinese investment (A$m) YearNumberAgricultureManufacturingMinerals and energy Real estateServices and tourism Total 1996-97102103517617210 1997-980000000 1998-990000000 1999-0025935545021210720 2000-010000000 2001-022370472023410311 2002-030000000 2003-041700297112151,100 2004-05206203918142264 2005-0643702236,75827907,259 2006-07874157001,203712112,640 2007-081,761-05,3111,4911216,923 2008-0957-8226,254n.a.5926,395

4. 4 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

5. 5 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