The Independent Australian
Is Comrade Rudd The Manchurian Candidate?
from issue No 18 Winter 2009
In the preceding articles Alan Fitzgerald has detailed some ALP connections with the Chinese Government. In The Howard Legacy, Rudd was dubbed as the Manchurian Candidate. This article looks at the his performance from that perspective.
It is generally accepted that Kevin Rudd is a detail man about running the country. Hence we can assume that four significant developments in Australia have his approval. These four developments are:
(1) Investment in the resource industries (covered below). The Chinese Government investment is so widespread and pervasive that they would have a better dossier on the resource industries in some details than the Australian Government.
(4)‘Soft power’ - e.g... the establishment of Confucius ‘Institutes’ in the universities (also covered below).
(3) Large scale immigration of Chinese via the educational institutions so that the Chinese are beginning to dominate the professional and managerial classes. This the theme of The Howard Legacy so that there is no need to go into it here, save to note that one of the first actions of the Rudd government was to increase immigration rates to record levels. At the same time their was little financial help for Australian universities, so that they continue to be dependent on international students. This will lead to increased dominance and will be the topic of a future article.
(4) Becoming a large holder of Australian Government bonds issued to sustain the spiralling deficit. There is no information about who is buying Australian bonds, although it is understood that such information will be released soon. It seems highly probable that the Chinese are large buyers, as they have of US bonds. Once a capital importer like Australia becomes a perennial client of a sovereign state it must influence policy.
from issue No 18 Winter 2009 In the preceding articles Alan Fitzgerald has detailed some ALP connections with the Chinese Government. In The Howard Legacy, Rudd was dubbed as the Manchurian Candidate. This article looks at the his performance from that perspective. It is generally accepted that Kevin Rudd is a detail man about running the country. Hence we can assume that four significant developments in Australia have his approval. These four developments are: (1) Investment in the resource industries (covered below). The Chinese Government investment is so widespread and pervasive that they would have a better dossier on the resource industries in some details than the Australian Government. (4)‘Soft power’ - e.g... the establishment of Confucius ‘Institutes’ in the universities (also covered below). (3) Large scale immigration of Chinese via the educational institutions so that the Chinese are beginning to dominate the professional and managerial classes. This the theme of The Howard Legacy so that there is no need to go into it here, save to note that one of the first actions of the Rudd government was to increase immigration rates to record levels. At the same time their was little financial help for Australian universities, so that they continue to be dependent on international students. This will lead to increased dominance and will be the topic of a future article. (4) Becoming a large holder of Australian Government bonds issued to sustain the spiralling deficit. There is no information about who is buying Australian bonds, although it is understood that such information will be released soon. It seems highly probable that the Chinese are large buyers, as they have of US bonds. Once a capital importer like Australia becomes a perennial client of a sovereign state it must influence policy. from issue No 18 Winter 2009 In the preceding articles Alan Fitzgerald has detailed some ALP connections with the Chinese Government. In The Howard Legacy, Rudd was dubbed as the Manchurian Candidate. This article looks at the his performance from that perspective. It is generally accepted that Kevin Rudd is a detail man about running the country. Hence we can assume that four significant developments in Australia have his approval. These four developments are: (1) Investment in the resource industries (covered below). The Chinese Government investment is so widespread and pervasive that they would have a better dossier on the resource industries in some details than the Australian Government. (4)‘Soft power’ - e.g... the establishment of Confucius ‘Institutes’ in the universities (also covered below). (3) Large scale immigration of Chinese via the educational institutions so that the Chinese are beginning to dominate the professional and managerial classes. This the theme of The Howard Legacy so that there is no need to go into it here, save to note that one of the first actions of the Rudd government was to increase immigration rates to record levels. At the same time their was little financial help for Australian universities, so that they continue to be dependent on international students. This will lead to increased dominance and will be the topic of a future article. (4) Becoming a large holder of Australian Government bonds issued to sustain the spiralling deficit. There is no information about who is buying Australian bonds, although it is understood that such information will be released soon. It seems highly probable that the Chinese are large buyers, as they have of US bonds. Once a capital importer like Australia becomes a perennial client of a sovereign state it must influence policy. from issue No 18 Winter 2009 In the preceding articles Alan Fitzgerald has detailed some ALP connections with the Chinese Government. In The Howard Legacy, Rudd was dubbed as the Manchurian Candidate. This article looks at the his performance from that perspective. It is generally accepted that Kevin Rudd is a detail man about running the country. Hence we can assume that four significant developments in Australia have his approval. These four developments are: (1) Investment in the resource industries (covered below). The Chinese Government investment is so widespread and pervasive that they would have a better dossier on the resource industries in some details than the Australian Government. (4)‘Soft power’ - e.g... the establishment of Confucius ‘Institutes’ in the universities (also covered below). (3) Large scale immigration of Chinese via the educational institutions so that the Chinese are beginning to dominate the professional and managerial classes. This the theme of The Howard Legacy so that there is no need to go into it here, save to note that one of the first actions of the Rudd government was to increase immigration rates to record levels. At the same time their was little financial help for Australian universities, so that they continue to be dependent on international students. This will lead to increased dominance and will be the topic of a future article. (4) Becoming a large holder of Australian Government bonds issued to sustain the spiralling deficit. There is no information about who is buying Australian bonds, although it is understood that such information will be released soon. It seems highly probable that the Chinese are large buyers, as they have of US bonds. Once a capital importer like Australia becomes a perennial client of a sovereign state it must influence policy. from issue No 18 Winter 2009 In the preceding articles Alan Fitzgerald has detailed some ALP connections with the Chinese Government. In The Howard Legacy, Rudd was dubbed as the Manchurian Candidate. This article looks at the his performance from that perspective. It is generally accepted that Kevin Rudd is a detail man about running the country. Hence we can assume that four significant developments in Australia have his approval. These four developments are: (1) Investment in the resource industries (covered below). The Chinese Government investment is so widespread and pervasive that they would have a better dossier on the resource industries in some details than the Australian Government. (4)‘Soft power’ - e.g... the establishment of Confucius ‘Institutes’ in the universities (also covered below). (3) Large scale immigration of Chinese via the educational institutions so that the Chinese are beginning to dominate the professional and managerial classes. This the theme of The Howard Legacy so that there is no need to go into it here, save to note that one of the first actions of the Rudd government was to increase immigration rates to record levels. At the same time their was little financial help for Australian universities, so that they continue to be dependent on international students. This will lead to increased dominance and will be the topic of a future article. (4) Becoming a large holder of Australian Government bonds issued to sustain the spiralling deficit. There is no information about who is buying Australian bonds, although it is understood that such information will be released soon. It seems highly probable that the Chinese are large buyers, as they have of US bonds. Once a capital importer like Australia becomes a perennial client of a sovereign state it must influence policy. from issue No 18 Winter 2009 In the preceding articles Alan Fitzgerald has detailed some ALP connections with the Chinese Government. In The Howard Legacy, Rudd was dubbed as the Manchurian Candidate. This article looks at the his performance from that perspective. It is generally accepted that Kevin Rudd is a detail man about running the country. Hence we can assume that four significant developments in Australia have his approval. These four developments are: (1) Investment in the resource industries (covered below). The Chinese Government investment is so widespread and pervasive that they would have a better dossier on the resource industries in some details than the Australian Government. (4)‘Soft power’ - e.g... the establishment of Confucius ‘Institutes’ in the universities (also covered below). (3) Large scale immigration of Chinese via the educational institutions so that the Chinese are beginning to dominate the professional and managerial classes. This the theme of The Howard Legacy so that there is no need to go into it here, save to note that one of the first actions of the Rudd government was to increase immigration rates to record levels. At the same time their was little financial help for Australian universities, so that they continue to be dependent on international students. This will lead to increased dominance and will be the topic of a future article. (4) Becoming a large holder of Australian Government bonds issued to sustain the spiralling deficit. There is no information about who is buying Australian bonds, although it is understood that such information will be released soon. It seems highly probable that the Chinese are large buyers, as they have of US bonds. Once a capital importer like Australia becomes a perennial client of a sovereign state it must influence policy.
Infiltration of Resources Sector Mineral and energy resources are the only areas in which Australia has some natural advantage in world trade. It seems obvious that Australia should be keeping control of their development. The Howard Government was content to let overseas companies buy many Australian companies, which many thought bad enough. However the arrival of China Inc. as large scale buyer is a different matter. The Foreign Investment Review Board (FIRB), located within Treasury, scrutinizes foreign take over proposals and gives expert advice to the Treasurer. The Chinese allege that it gives Chinese entities a harder time during evaluation than other overseas companies. There are two very good reasons. Firstly, it means customers are owning the resource. One can prattle on about the Australia Tax Office ensuring that transfer pricing will be applied to make certain that correct Australian tax is paid. There are many ways of allocating overheads. Secondly, foreign Government ownership of resources leads to delicate diplomatic issues if Australia wishes to operate in the best interests of Australia in regulating such companies. Behind the scenes pressure can be exerted at government level. According to an article in The Australian 24 June 09 the manager of the FIRB told the Senate inquiry that they were seeing‘... a fair degree of overt commercial behaviour with Chinese companies’. Presumably they were seen to more competitive with each other and more independent of central control. That could be true at an operational level. However there is little doubt that acquisitions must be approved by the Chinese Government. Furthermore even comparatively small firms like Chinalco can raise huge sums of money in China to back their plans. Total control is preferred, but always board representation is required if holding minority positions. In the same Australian article Glenn Stevens, Governor of the Reserve Bank, refers to the fact conditions applied to the Chinese entity Hunan Valin which had two directors compared with no conditions for Leucadia (US venture fund), also two directors. He plays down the fact that Hunan Valin is a customer and the whole article reads like a briefing from Chinese interests. Most conditions are unenforceable and if any attempt was made to enforce them it could create a diplomatic issue. China of course uses bureaucratic and convoluted procedures as well as outright fiats to control foreign investment When the controversial bail-out of Rio was announced early this year, Xiao’s (the then Chinalco chairman) achievements were recognised when he was elevated to the Chinese Government’s cabinet, a clear sign of the links between business and government in China. How the Rudd government was going to sell this to the Australian public was a problem, especially with people like Senator Barnaby Joyce leading a crusade. The FIRB was allegedly asking for many conditions. These are worthless, unenforceable in practice, as shown by companies everywhere. Fortunately for the Australian government the rapaciousness of the deal aroused existing shareholders and it was called off. While Rio occupied attention the Chinese government was quietly picking up smaller acquisitions, growing in total size to be the third force in Australia’s resources. There does not seem to be any academic or government study on the size, but Stephen Mayne, in his maynereport.com, makes an attempt to note developments reported in the media. The following draws on that, together with some other sources, and adds information. Maybe some have been missed. By the time that you read this more investment will have been made. Indeed Treasure Wayne Swan has announced that he is authorising
Iron Ore Rio Tinto got itself into financial trouble because the chairman and managing director did not wish to lose their jobs under a proposed takeover by BHP. Instead they bought an aluminium business at the top of the market, making the BHP offer unsustainable. Loaded with debt, when the global financial crisis occurred, Rio turned to selling an extra 8% share to Chinalco, a modest sized Chinese entity, but with unlimited bank backing. The deal was extraordinarily complex, with Chinalco’s fingers in every pie, but above all, two unsackable directors on the board. Rio already has alliances with Chinese interests in the Pilbara, China Iron & Steel has a 40% interest in the Rio Tinto-operated Channar iron-ore mine. Shanghai Baosteel Group owns 46% of the Rio Tinto-operated Eastern Range iron ore mine in Pilbara. China Metallurgical Investment Co (CMIC) put in $400 million for the Cape Lambert Iron ore project in WA in 2008. Nearby Emergent Resources is setting up a 50/50 venture to develop the Beyondie project after an approach by CMIC. Hunan Valin will have two directors on the Fortescue Metals board after acquiring a 17% shareholding. Shougang Corp China’s fourth biggest steel bought 13% of iron ore developer Australian Resources and had an option to go to 50% of the $US2.1 billion development of the Balmoral South mine and port project in WA through an interest free loan and also to buy the entire output. However it appears that Shougang will not go ahead because it cannot gain control. In the WA Mid West the Chinese Government has made a determined effort to be dominant. Sinosteel completed a takeover of WA iron ore hopeful Midwest Corp. and would like to buy neighbouring Murchison Metals, but FIRB has limited it to a maximum 49%. It has 5.85% of the shares and one director on the board. Anshan Iron & Steel has 36.5 % of iron ore prospective Gindalbie and signed joint venture deal to develop the Karara Iron Ore project in Western Australia. It has a director on the Board, but obviously will have more say in the joint venture. ..(Ansham)...has strong Chinese Government support for securing sources of long term iron ore supply. (From the press release announcing the FIRB approval.) The bulk of the money to start up will be funded by the China Development Bank. In Tasmania the Savage River operation has a complicated structure, but clearly the Chinese are in control with the chairman and two board members. Shadong enabled the operation to consolidate debt with the Bank of China.
Other Metals. CITIC has a 22.5% stake in the Portland Aluminium Smelter. In September 2007 the Queensland Government awarded Chalco rights to develop $3 billion bauxite project near Aurukun, which Noel Pearson has claimed includes an unfair forced land grab. In May 2009 China Nonferrous Metal Mining Co (CNMC): secured a 51.66% shareholding of rare earths company Lynas, subject to regulatory approval in Australia and China. There will be four CNMC directors on the board. CNMC also provided a corporate guarantee to a Chinese Bank. What is significant is that China already has 90% of the world’s supplies. Rare earths are used extensively in green technology. Yet ASIC allowed this deal to increase China’s near monopoly. The FIRB is examining the proposal, but has let another Chinese entity to buy 25%in the less advanced rare earths explorer Arafura Resources (The Age 18 July 2009) Zhongjin, China’s third largest zinc producer took 52% of the Broken Hill based Perilya without any FIRB conditions in early 2009. Immediately ZL installed a majority of directors, despite protest from the Australian Shareholders Association that it was not good governance practice,. OZ Minerals Limited was Australia’s third largest diversified mining company. It was the world’s second largest producer of zinc, a substantial producer of copper, lead, gold and silver and was also growing its production of nickel. The Ozmin takeover also added to Chinese zinc holdings through the Century and Rosebery mines. The Ozmin proposal had a newly developed copper mine inside the Woomera restricted area excised, leaving Ozmin as a listed company. Kagara is a small mining company with polymetalic mines; major products are copper and zinc. Kagara has some interesting prospects as well. The FIRB has recently granted approval for Guadong Foreign trading Group to acquire a 19.9% shareholding, which entitles them to a seat on the board. It would appear that China Inc now has control, over, or a substantial interest in, Australia’s zinc producers; maybe heading for a monopoly. Yunnan Tin is purchasing an exploration project, the Hera gold -base metal deposit in NSW. YTC admits the prospect is normally too small, but it part of an acquisitions plan.
Energy China Petrochemical Corporation: China’s biggest energy distributor secured 60% and control of the Puffin oil field in the Timor Sea from the struggling AED Oil in 2008. The deal values the assets at $1 billion. CNOOC holds a 25% share in China LNG, a new joint venture within the existing $19 billion North West Shelf structure that diluted the other six joint venture parties down to 12.5% each. CITIC: spent $113 million in July 2007 lifting stake in Macarthur Coal from 11.6% to 19.9% but is now losing on the investment after the resources bubble burst.
Treasurer Wayne Swan has said that he is approving a Chinese investment proposal every week. Obviously China Inc. is in it for the long term and by swallowing small companies and exploration rights will eventually become a powerhouse in Australian resources.
Soft Power and the Confucius Institutes The Confucius Institutes are an interesting development in Chinese diplomacy. The headquarters is in Beijing and it is under the The Office of Chinese Language Council International, i.e.. an arm of the Chinese Government. According to Wikipedia the first Confucius Institute was opened in 2004 and now there are 328 in 82 countries. Wikipedia records criticism inasmuch as these institutes are located within universities and exert influence over what is taught. It has also been suggested that they can be used for intelligence gathering (as distinct from spying). Australia had four established during the Howard regime, all in prestigious Group of 8 premium universities - UWA, Adelaide, Melbourne and Sydney. All offer Chinese language assistance, calligraphy and painting. There has been a sudden increase in 2009 - University of New South Wales, University of Queensland and Queensland University of Technology. (The latter two in Rudd’s home state) This brings the total to seven; well over Australia’s share. The Chinese Government has clearly marked Australia for special attention. The Rudd Government has splashed cash around, but no more than a smidgen to the universities. The universities, strapped for funds, have welcomed investment without thought of compromising their integrity. Professor Jocelyn Chey, a former diplomat and now lecturer in Chinese Studies at Sydney University, said Confucius institutes were primarily propaganda tools for the Chinese Communist Party and should not be integrated into the regular academic system. She told The Epoch Times* (15 October 2007).
I was concerned that the University of Sydney was entering into an agreement with the [Chinese] Ministry of Education without considering what the objectives of the Chinese side were, I understand that the university might see some benefits in doing that but they should be doing that with their eyes open. Exactly. University academics, administrators and intellectuals are notoriously gullible when it comes to being taken in by flattery; e.g... many were blind to the horrors of Stalin and Mao and joined ‘Friendship Societies’, i.e. fronts. The following material is drawn from the websites of the Institutes. UWA won a Confucius of the year award in 2007. This institute is strategically highly important. Its mission reads: ‘...Forge strategic alliances with business, industry, government and other institutions with an interest in closer and more productive ties with China..’. The Confucius Institute at the University of Adelaide, together with the Institute of Mineral and Energy Resources at the University of Adelaide held a forum on Chinese Investment in Australian Resource Industry on the 8th April 2009 at the National Wine Centre, Adelaide. The inaugural China Briefing was launched within the context that although Chinese investment in Australia is tiny in comparison to other foreign countries, there is a profound worry among some sectors of the Australian society about Chinese state owned enterprises buying up resource companies in Australia. It will come as no surprise that ‘... The forum reached a consensus that Chinese investment in Australia resource industries should be welcomed because it would bring many benefits to the Australian economy.’ At Melbourne University ‘With funding from both the Chinese and Victorian Governments, the Institute is co-located with the Australian China Business Council.’ Sydney University Confucius Institute staff (no less than 6) are exclusively Chinese. It offers what appears to be a comprehensive service to people wishing to travel to China on business and is less overt about promotion.
* The Epoch Times is published in English and Chinese. The headquarters are in New York, but an Australian edition is published. It is a strong supporter of Falun Gong, a spiritual discipline, which has been persecuted in China.
