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FRANCES ADAMSON (NEW AUSTRALIAN AMBASSADOR TO CHINA): Thank you Ministers both.

Extending the IT metaphor, we'll now move to the interactive part of the morning, for which I think we've got about 20 minutes.

But can I just say, within minutes for my appointment being announced, it was pointed out to me that 68 per cent of Australia's goods exports to China come from Western Australia, and I was invited to come here for an extended period of time, which I'm enjoying very much. And I've met a number of you in the room already, and look forward to working with many of you during my term as ambassador.

What we'll do now though is take questions — I think probably in groups if we take two or three questions at a time — that will enable us to get through as many as we can.

QUESTION: Ray Wills from the Sustainable Energy Association.

One of the things that's very obvious with China's investment strategies is its investment in renewables. We're making a lot of the fact that we're going to be investing $10 billion through a new bank in Australia, but last year, China invested $48.9 billion in one year in renewable energy — I'd love your comments.

FRANCES ADAMSON: Thank you. First question on renewables.   And the second question over there?

QUESTION: Hi, how are you going? Yeah, I'm Blaire Price from Aspermont — we've got various trade publications. Our main exports to China are bulk commodities such as coal and iron ore. Wouldn't it be more strategic to increase our focus on mining exports instead of weighing them down with carbon and mining taxes? You know I'm a big fan of Australia - China 1.0.

FRANCES ADAMSON: Right, that's a carbon tax question, and number three here.

QUESTION: Alan Green from Chinagreen Group.  Every time I visit China, I get asked the same question: we want coal. Do you still want coal? Two million tonnes [indistinct] different groups. And I come back to Australia and I get blank stares.

The situation is pretty difficult for the small person in China. I'm talking about the small entities to get — to break through to be able to be part of the grouping that needs to be formed in China. We need to be in China helping them form together in a private way, not being controlled by the Government, and the governments [indistinct].

FRANCES ADAMSON: That's three questions; first on renewables, second on mining exports, the third really a — I think on breaking through, small companies breaking through into China, but with an emphasis on coal.

KEVIN RUDD: Why don't I have a go at renewables, and — just so that we don't go through the same list each if you're happy with the other two, Craig?

The — what is worth reading, if you haven't already — by the way, can I just say in reference to 1.0, 2.0, these are not in mutual contradiction. It's not as if China goes, blip, end of 1.0, beginning of 2.0. But we are blind to reality if we don't realise that China is changing its growth model — it is.

And so we can pretend that it's not going to change, or we can accept the fact that they are changing it and we're now dealing with these two ongoing realities. And therefore, we need to address both, and that's the whole purpose of our presentation here.

The energy and resources story is known well in Australia, the services sector story is known less well in Australia, which is why we're doing what we're doing, given the current changes in China's economic policy direction.

So on renewables, the two documents worth reading on this is not just the five year plan in terms of its emphasis on three things: renewable energy, energy efficiency, as well as other measures to physically bring down our carbon footprints. These all represent significant business opportunities in themselves.

If you look at China's own national economic statement on climate change, which goes back about three to four years now, it is quite clear from that statement I think from 2006/7 that China has within its national strategic sights the expansion of the renewable energy sector, and this has been unfolding over the course of four to five years.

The other point I'd make is simply the statistical one which comes from the presentation before.

Given the commitment to renewables in excess of 10 percent of China's primary energy consumption, this represents massive opportunities as well.

China has already developed its first solar-only cities; I think you might be familiar with one up in the north east. I was invited to its opening some time last year.

And you see model renewable energy projects springing up right across the country.

So whatever your sector, whether it's in solar, whether it's in geothermal, whether it's in wind, whether it's in wave, whether it's in tidal, let me tell you, as well as in clean coal, right across the spectrum of the clean coal associated technologies, there is now a very significant emerging market in China. And again Australia is well positioned to enter that market if we have the imagination to do so.

And frankly one of the reasons for a carbon price within Australia is to make it possible for the renewable energy sector to have predictability about the cost of carbon in order to shape the economic environment in which it becomes much more cost competitive to develop renewable energy within this country. That's the discipline which underpins carbon prices right around the world. That's why in Europe, in Germany and elsewhere, you see the rapid expansion of renewable energy sectors because carbon prices have been around for a while, and that's why it represents an opportunity here in Australia not a threat.

CRAIG EMERSON: On what we're doing on a renewable energy, obviously we had a range of programs that have been in a sense coordinated and brought together so that we can ensure that they're well managed, and that's outlined in the move to a clean energy future that was announced on Sunday.

But I think the reference that you're making was specifically to an EFIC like organisation. EFIC has been very successful, Export Finance Investment Corporation, in supporting our exporters. What this is designed to do is the same thing for renewable energy. So there will need to be commerciality about the proposals, it won't be at the very very early stage of experimentation, but just as EFIC has supported our exporters in the past, the same model is to be applied. Our political opponents expressed on Sunday complete opposition to that particular measure and all the others.

In relation to carbon and mining — carbon pricing and mining tax I think Kevin's broadly covered that.

It does provide incentives to move towards renewable energy sources and also to lower carbon emitting sources. There's no doubt in my mind and in the minds of most analysts that LNG will be, though it is a fossil fuel, an enormously important transitional fuel as we move to a lower carbon economy, enormously important. And that is recognised around the world as being so important for substituting into power generation including base load power generation. So yes renewables, but also lower emitting fossil fuel sources such as LNG, great reserves of which Western Australia is blessed.

In relation to the mining tax we do believe that the community can get a somewhat greater share of the proceeds from mining in Australia, given that minerals are now at 140 year highs, and some minerals, including coal, have increased in price sevenfold.

But that money, that money is actually going into cutting the company tax rate, it's going to increasing tax breaks for small business, it's going to badly needed infrastructure investment here in Western Australia, in Queensland and other states. So the money would be good — be put to very good uses, notwithstanding the introduction, announced introduction of this tax there's an enormous pipeline of investment in minerals and energy in this country.

In coal, as we saw today, this morning the coverage of a takeover bid for a major coal mining company Macarthur Coal by Peabody, an international corporation. A lot of rhetoric around on carbon pricing but these people are voting with their cheque books, voting with their chequebooks and have launched that takeover bid one day after the move to a clean energy future was announced on Sunday.

The issue about small companies, I think this is probably one of the strengths of what we're arguing here, small companies, subject to correction from Kevin, if — if small companies go mainly to Beijing and Shanghai these are well worn paths and there's an enormous amount of competition from people treading the same path.

And this is one of the reasons we're looking at these other five cities, and I think that my early impressions of meeting provincial governors and mayors is that they are so keen, as Kevin outlined, to embrace proposals, nothing automatic about this, it's got to make commercial sense, but they are really, really keen in these major economies called provinces of China.

And it seems to me that if I were running a small business, which Kevin and I once did, that's the sort of place that I'd be visiting rather than going along — and I'm not sure where you have been, Sir but I'm just saying yeah that this is maybe one of the strengths of what we're proposing here is to meet these provincial mayors and governors.

In our system maybe it wouldn't be that important to meet a local councillor or a local mayor but certainly in China it is very important because they do know all the businesses and they have a clear understanding of what is needed for their cities and provinces.

FRANCES ADAMSON: Right thank you. Can we move to the next set of questions, which depending on the length of the questions and the length of the answers may in fact be our last set.

Woman there in the middle is the first person. Gentleman over there on the far side, Senator Eggleston third question.

QUESTION: Leanne Barnes, Murdoch University. My question is about education — international education in particular as we know is highly competitive yet our student numbers internationally are declining across the country.   Some of that of course is the dollar, but some of it is attributed also to our visa policy. I wonder if you could comment.

FRANCES ADAMSON: First question on education services. The second question over there.

QUESTION: My name's Dick Lester of Lester Group. I'm interested in facilitating two way investment between China and Australia, and I ask the Foreign Minister whether individual Chinese business people can, with the imprimatur of their national government transfer money for investment into Australia, and Australians transferring money back to China for investment there? What's the official Chinese Government attitude to that two-way investment trade?

FRANCES ADAMSON: Okay and then third question — that was on investment backwards and forwards transferring funds, Senator Egglestone, microphone coming.

QUESTION: My question is that we export a lot of commodities to China, particularly iron ore, do you think there's any scope for — rather than just shipping out the ore having some degree of processing done in Australia and sending processed products such as rolled steel to China?

FRANCES ADAMSON: And the third question on commodities processing. Who would like to go first?

CRAIG EMERSON: On international education, you do hear politicians saying we're prioritising this and prioritising that and it ends up sounding like we're prioritising everything. But we are prioritising education.

You're right an explanation, an explanation for the decline in numbers recently is the high value of the dollar. There's also been a step up in international competition, so we face greater competition not only from other countries as far as China is concerned, but within China. The rate of building of universities of the highest quality is phenomenal, so it's going to be a very competitive industry.

In terms of our visa policies, look we've had in the not too distant past some real problems not related to higher education, but related to English language courses and so on that it has required a review and getting that back on an even keel, but the issue of visas is one that we are actively discussing with the Government.

We don't want to kill the goose that laid the golden egg by overdoing it on visas, but we have to make sure that reputational issues are protected, and that means including the reputations of universities that don't deserve any sullying of their reputation but can be affected with a broad brush attitude.

So we're working very hard on that.

But I know Chris Evans, when I was in China late last year, Chris was there with a group of universities reassuring the Chinese that we were very, very keen to continue, what I think is not only a great commercial investment, but an unsurpassed investment in relationships between two big countries.

You can tell from Kevin and all — so many people that you know that the fondness that people have for each other’s countries is often built out of wonderful experiences of living in those countries and going to university. And if people said to me, what's the one thing that you could do to strengthen a relationship right across the board, I'd say go to someone else's university.

On two way investment, do you want — I'm happy to seek to deal with that.

I think — well I know the figures of these that there have been since late 2007, 180 applications by Chinese investors for foreign investment in Australia. Of those 180 applications, 180 have been approved, six of them with conditions. So we have proved ourselves, I think, to be very interested in attracting foreign investment from China.

In terms of our investment into China, sir, I can't answer your questions about convertibility and such matters, but I know that there are regulations of course, as there are in Australia.

But I also know that talking to my counterparts, when we talk, we don't just talk trade. We talk investment because the success story in any relationship has got to be beyond buying and selling goods and services. It's got to be an investment, and I think the Chinese know that.

And I see Kevin was in the paper this morning making some comments overnight about how our own investment regime is very open. Yes we have a Foreign Investment Review Board. Yes we do. But it does a pretty good job, and it certainly doesn't get in the way in any unwarranted fashion.

Now in terms of — I think I did that — in terms of mineral processing, look I know that there have been a huge number of studies about the possibility of further stage processing of iron ore in Australia. There were proposals right through the 1980s. I know Ross Garnaut was very interested in that. We haven't given up on that. The economics hasn't worked in the past, but when we do talk about the future of LNG in the world economy, I think that that's something worth thinking about as an energy source for further stage processing, Alan.

I don't pretend to be an expert, but what I do know is that the economics, with climate change and — issues, is changing. And it's changing in favour of some of the energy sources that we've got here in Australia. And we're blessed with these massive reserves of LNG, which we do liquefy and send overseas, but some of that could well be used here in Australia, but it would require a very good detailed cost-benefit analysis; an analysis of what's changed since the 1980s when I was working with Ross Garnaut on these very ideas of at least initial stage processing of iron ore in this country. But there are other minerals as well, and I'm certainly interested in revisiting those now that some of these fundamental economic factors are changing favourably for Australia.

KEVIN RUDD: Can I just add a footnote on two of those points. One, on education, and the other on investment.

On education, there are three factors driving these decisions by Chinese and all international students. One is price. Let's just be blunt about it. If you've got a high dollar, it's a problem. All Australian exporters are suffering from a high dollar. It's just a truth. You go to the tourism industry in Queensland — everyone's being impacted by a high dollar. And the education services sector is no different. And that is a current challenge for everybody in this economy. And there are a range of policy responses to that which Craig and I referred to in many other forums.

The second is the quality of what you do. The reputational standing of the Australian universities sector and the wider education sector is a precious commodity to preserve. Therefore the education sector has a massive interest in China, and elsewhere in the world, including India, and branding itself well — but also cracking down on, shall I say, damages to the brand by any institution, be it a university or a non-university institution. This is a precious brand to preserve — brand Australia by and large around the world is a very good brand.

But you within the industry, and the wider industry, and the wider sector, also have a responsibility to help us in government, and you yourselves to crack down on any, shall I say, fly by night operations. And they are not just restricted to the non-university sector.

Third point of course goes to visas and points of access. It's fair to say with our colleague Chris Bowen, this is a matter for rolling review under — given the changing circumstances around the region, around the world, and within the sector. And Chris is always alert to changes in, shall I say, overall patterns of demand. So this is not something which is all summed up one day — and that's the end of it. It's a question of rolling continuing review on his part.

And finally on investment, could I just reinforce what Craig has just said. Look at the World Trade Organization's recent ranking of Australia in terms of economic openness index around the world.

This is the third most open economy in the world. It's not us saying it. It's the World Bank.

You look at the Wall Street Journal's assessment of Australia in terms of its overall degree of economic liberty, at home and internationally. We are right up there in the first one, two or three.

And the corollary I made yesterday at the Boao Forum is that when Australian investors seek to go to China, there are real restrictions in agriculture, there are real restrictions for example in mining, and the mining sector in China, there are real restrictions in the services sector in China.

If you're here from the financial services sector you know how difficult it is to obtain licences and the rest.  

So one of the reasons why Craig is engaged in fundamental negotiations with our Chinese friends through a free trade agreement, and all that it contains, is that how do we gain a better deal for Australian investors in China as well.

So when you hear this debate — and assume that it's just some one way street whereby the Foreign Investment Review Board is the only institution which constructs a restrictions — a) it's not true, look at the facts, 180 projects, all approved, six with conditions; b) we confront a range of restrictions in investing in China.

And these two things are true.

Let us work within the truth of that. The facts of it. And to create a better environment for investment all round.

ENDS

» Australia-China 2.0 presentation [PDF]

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