E&OE
26 March 2009
Doorstop Interview, Australian Embassy, Beijing
Subjects: Australia-China Strategic Dialogue, Australian investment in western China, Chinese investment in the Australian resources sector
STEPHEN SMITH: Firstly, thanks very much for coming. I’ve just arrived in Beijing having spent the last couple of days in Chengdu in Sichuan Province and also in Chongqing. I deliberately started my visit in the west to make the point that Australia of course understands that China is more than just Beijing, Shanghai and Guangzhou.
And in Chengdu, I also took the opportunity to inspect some of the very terrible earthquake damage and to see where Australia is continuing to render assistance. The response by the Australian public was of course magnificent, with people spontaneously giving to the Red Cross. I was very pleased to be able to inspect some of the projects where there is an Australian involvement in terms of the reconstruction. In Chongqing, I must say that I have never been as impressed with a city in recent times, since the first occasion I arrived in Shanghai. This is unquestionably an economic powerhouse and I continue to encourage Australian industry, Australian business and Australian investors to look west and to contemplate economic activity in Chongqing and also in Sichuan province.
It is also quite clear, given that Chongqing’s and Sichuan Province’s economies are driven domestically, that they haven’t been subject to the same global financial crisis consequences as we have seen in other parts of China and indeed in Australia.
In Beijing, I’ll be having the second Strategic Dialogue with my counterpart, Foreign Minister Yang. We’ll do that tomorrow. I’ll also be meeting with Vice President Xi and Standing Committee Member Zhou. One of the purposes of visits to China of course is to make high-level contacts and to form high-level relationships. That has been a good thing about this trip. In both Sichuan Province and in Chongqing, I met with the respective party secretaries. In Sichuan Province, Party Secretary Liu and today in Chongqing with Party Secretary Bo and they’ve been very productive meetings.
With Foreign Minister Yang, with the Strategic Dialogue, we will not just touch upon in our bilateral meeting all the bilateral issues relating to Australia and China but also the significant regional and international strategic matters of interest.
I’m happy to try and respond to your questions.
JOURNALIST: Can you tell us a bit more about that discussion, what the topics will be, for example in the Strategic Dialogue?
SMITH: With the Strategic Dialogue, we traverse all the array of international strategic and regional strategic issues. So we’ll obviously contemplate and talk about the global financial crisis and the consequences of that, our work together in the G20. We’ll also speak about regional matters, regional architecture, including our proposal for an Asia-Pacific Community. We’ll also talk about those things which are relevant to the international community in the course of this century. The rise of China, the rise of India, the rise of the ASEAN economies combined, the need for China and the United States to have a first class relationship would be welcomed very much, the initial contact between the Chinese administration and the new Obama administration.
JOURNALIST: Are you likely to be discussing the possible investment by Chinese companies into Australian mineral resources companies?
SMITH: We’ll certainly discuss the Free Trade Agreement and the need for negotiations for the Free Trade Agreement and the fact that a Free Trade Agreement between Australia and China will bring with it substantial economic benefits. Part of the proposal for a Free Trade Agreement of course includes investment matters: an investment chapter. So, whilst I expect that we’ll discuss the Free Trade Agreement and investment matters generally, it won’t necessarily be the case that we talk about individual applications, for example, Chinalco or OzMetals, which the Treasurer has before him.
JOURNALIST: Mr Smith, can I ask about the case of Helen Liu and the reports in the papers this morning in Australia? I’m wondering if you had any further update on anything that’s come out of that, but more generally: how do Australian Government Agencies ascertain where the Chinese Government state ends and the broader overseas Chinese community begins? Obviously there’s not a discrete boundary all the time. Are you worried that it’s becoming increasingly difficult to protect Australian intelligence generally?
SMITH: Well if your question is about the matter relating to my colleague, the Defence Minister, Joel Fitzgibbon, my comment I think appropriately is the same as he has made and the same as the Prime Minister has made, which is: the Secretary of the Defence department, Mr Warner, and the head of the armed services CDF Angus Houston have indicated that an investigation – an inquiry – is underway in respect of those matters and I don’t think it is appropriate for me or anyone else to be making any comments about the detail of those matters in advance of that investigation.
JOURNALIST: Any more broadly on the question about the overseas Chinese community and whether it is succeeding in gathering intelligence for the Chinese state?
SMITH: Well, again you’re seeking to draw me on what will only be interpreted as a comment upon the matters related to Mr Fitzgibbon. It’s appropriate that they be left to the inquiry that the Secretary of Defence and the Chief of the Armed Services have instituted.
JOURNALIST: Mr Smith, you’ve already said that the Chinalco issue may not come up directly in the talks tomorrow. Now, how do the two countries manage their relationship effectively when some of the most important issues such as resources diplomacy can’t be dealt with directly at this level? How do you deal with those issues?
SMITH: There is of course a difference between policy principles and general strategic framework with individual applications for investment into Australia. The Chinese authorities understand the approach the Australian Government takes. We welcome foreign investment in Australia. As a country, we have sustained ourselves economically by being an attractive place for overseas capital investment and by being a great trading nation. Mr Swan as Treasurer has published the principles that he bears in mind or complies with when dealing with these matters, so the legal processes and the policy processes are quite well known. One of the factors which Mr Swan has published which he will take into account of course is whether the source of the funds is from a state owned instrumentality. And everyone accepts and understands that that is what Chinalco is. So obviously, that is one factor which Mr Swan will take into account.
I think it is very important that we have a conversation about the Free Trade Agreement, which we will. Having just come from the west, I made the point to the respective party secretaries in Sichuan and Chongqing that a Free Trade Agreement would see very considerable benefits flow to the west of China. So, as part of the Free Trade Agreement negotiations include an investment chapter, of course we will have a general conversation about the Free Trade Agreement and also investment matters. But the policy and the principles that we apply for individual cases are well known and that’s essentially a matter for Mr Swan. Equally, no one is suggesting that these aren’t necessarily complex or complicated matters, which is why Mr Swan is very sensibly going through a deliberative process and he will make his decision in due course, applying the test which is: “is this in Australia’s national interest?”
JOURNALIST: But it’s a little difficult to swallow that whether this deal passes or not, will have no bearing on the overall health of the Australia – China relationship.
SMITH: There may well be a number of things where Australia and China have a different view. For example, when we meet with Chinese officials, Australia always discusses with China human rights issues. These are issues where we don’t necessarily agree. There may well in the past or in the future, individual investment matters where the Chinese authorities don’t agree with the decisions that Australia makes but none of these things disturb what is now a very effective partnership between Australia and China. And if you look at the history of the relationship: early recognition by one of the Government’s predecessor governments, the Whitlam Government of 1972; early adoption of the One China policy; an economic relationship that then started with minerals resources from my own state of Western Australia. But now the relationship which is reflected by the Strategic Dialogue that I will have with Foreign Minister Yang tomorrow, encompasses all the trappings of a modern bilateral relationship. It is a very strong partnership. And in the context of mutual respect, there are often things we may disagree about but they don’t disturb the fundamentals of the relationship.
JOURNALIST: Just one other question – why is it that the visit by China’s propaganda chief was kept so secret by the government?
SMITH: Well, I don’t agree with the summation, if you like, in your question. And frankly, I think there is nothing in what’s occurred. The Prime Minister meets with a lot of people. Sometimes media are alerted to these meetings, sometimes they’re not. It was no secret that Standing Committee member Li was there. Indeed, when I last left Canberra, on the last Friday that we sat, as my plane flew out, his plane arrived. It was a big plane with a lot of people. It was no secret that he was around. So, I frankly think that it is much ado about nothing.
JOURNALIST: What was it that they discussed, what came of those meetings?
SMITH: Well the Prime Minister’s office has issued a press statement about what they discussed, so I’m not proposing to add to that. But frankly, there’s nothing in this and that’s been my attitude from day one.
JOURNALIST: Can I just clarify one point on the source of funds you were referring to on the purchase of a share in Rio. Do you mean the source of banking finance or the source of the actual investor?
SMITH: Well, Mr Swan has published those principles. From memory – and I’m happy to be corrected on the precise time – from memory, it was January or February last year that he published seven or eight principles that he would apply in terms of making decision under the overall test of the national interest. When these principles were published, it was generally acknowledged that these were the sorts of considerations that treasurers had in the past taken into account. One of the factors – and it is there on the record for you to check – is whether the source of the investment is from a state-owned or state-controlled instrumentality. I don’t think anyone is disputing that that is what Chinalco is.
[ENDS]
Media inquiries
Foreign Minister's office (02) 6277 7500