China could bolster Rudd’s infrastructure program

By Jennifer Perry

Chinese investors are increasingly willing to consider investment in Australian infrastructure, particularly those integrated with resource development, says Adelaide-based specialist investment consultancy Kimberly Global.
One of its principal directors, Dr Xian Tao, said, Most of the Chinese investment in Australia is in the resources sector and if that investment is designed to expand resource project development here, then it will most likely generate additional requirements for associated ore export infrastructure - and new or extended rail and port facilities will be most in demand.
She believes such projects are contenders for the Federal Governments infrastructure plans and as such would interest some Chinese investment agencies as they can deliver long-term yields and asset value growth.
In addition, any financing of the Australian Governments infrastructure stimulus plan you would expect, could be on a significant scale and would therefore involve Government-to-Government negotiations as well as normal commercial considerations.
Dr Tao said that the kinds of business cornerstones that are needed from Australias end to encourage Chinese investment include keeping the door open, improving policies, rules and regulations, having real expectations and reducing risks in the environmental assessment process.
To make it simple, if the Australian Treasury says yes to those big proposed funds in Rio, OZ minerals etc, then the global investment houses such as CIC could well seriously consider helping finance the Rudd Governments infrastructure program.
It was reported that Federal Treasurer Wayne Swan has met with the Chairman of China Investment Corporation (CIC) recently, in order to discuss whether China could help finance Prime Minister Rudds infrastructure program. CIC is the largest Chinese Government owned fund.
Communications Minister Stephen Conroy reportedly said that the Building Australia Fund for critical infrastructure would contain only about $12.6 billion by the end of June, rather than the $20 billion that was expected back in May.
Dr Tao said that potential Chinese interest in infrastructure investment in Australia including rail made sense, even though any large-scale such investments would need to go through Foreign Investment Review Board (FIRB) approvals. If successful, Dr Tao believes there would be considerable scope for further investment.
Within this environment, you can expect all parties, but particularly a key stakeholder such as CIC to be anxious to ensure full transparency and clarity as to what foreign investment regimes will apply.
She believes resources-related infrastructure is especially attractive as it, generates considerable cash flow and good investment return which is in line with current revenue generation and margin expectations among Chinas global lending fraternity.