Australia must ease China investment confusion: economists

Australia's government, headed by Mandarin-speaking Prime Minister Kevin Rudd, should open talks with Beijing to ease uncertainty clouding Chinese investment in the country, two prominent academic economists said on Thursday.

Although Chinese aluminium giant Chinalco and U.S. aluminium maker Alcoa recently won approval to buy a 12 percent stake in Anglo-Australian miner Rio Tinto, Chinese investment in Australia was clouded in 'confusion and uncertainty', the pair said in a research paper.

A wave of Chinese mineral and commodity firms have been eager to snap up foreign assets in Australia and other resource-rich countries to fuel China's fast-growing economy, using the cash generated by years of breakneck economic growth.

The centre-left Labor government in February warned it would act in Australia's national interest when assessing investment applications from state-owned companies, adding state enterprises must operate at arms length from their governments.

Treasurer Wayne Swan will rule within weeks on a bid by Chinese investor Sinosteel for a $1.3 billion stake in West Australian ore miner Murchison Metals.

Sinosteel's interest in Murchison has been heightened by a recent Western Australian state government decision to ask a Murchison consortium to build a new port to serve the region.

Chinalco's approval in August came as Australia's competition watchdog mulls BHP Billiton $136 billion all-share takeover bid for Rio to create a global mining titan, raising concerns among steel makers in China and Europe.

Rio and BHP are the world's second- and third-largest iron ore producers, respectively, and some industry experts saw Chinalco's Rio move as a bid by Beijing to protect its steel sector.

Canberra's anxiety over the growth of foreign investment by China was as unfounded as concern over Japanese investment decades ago during Tokyo's emergence as Australia's major economic partner, Drysdale and Findlay said.

To ease uncertainty, Drysdale and Findlay said the Labor government should begin routine consultations between Australian and Chinese authorities for more transparent scrutiny of competition and corporate governance issues.

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