Smith says China talks will not necessarily focus on Chinalco deal

Foreign Minister Stephen Smith says his talks in China will focus on free trade and general investment, rather than specific deals such as the proposed $US19.5 billion investment by Chinese aluminium giant Chinalco in Rio Tinto Ltd.

"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 (sic Oz Minerals), which the Treasurer has before him," Mr Smith told reporters in Beijing, China, ahead of talks with Chinese Foreign Minister Yang Jiechi today that will involve discussion of a free trade pact.

In considering the deal, Mr Smith said federal Treasurer Wayne Swan would take into account whether the source of the funds was from a state-owned entity, as was the case with Chinalco.

"One of the factors - and that is on the record for you to check - is whether the source of the investment is from a state-owned or state-controlled instrumentality," he said.

"I don't think anyone is disputing that that is what Chinalco is."

Chinalco has proposed to invest about $US19.5 billion in Rio Tinto, giving it a potential stake in the company of up to 18 per cent, partly through investments in specific iron ore, copper and aluminium assets, as well as convertible bonds. The deal, which has drawn criticism from politicians, unions and some shareholders, is being considered by the Foreign Investment Review Board (FIRB), and its ultimate fate will depend on the decision of Mr Swan.

Mr Smith said a proposed free trade agreement between Beijing and Canberra could address investments between the two sides.

Earlier, a report in the Australian Financial Review said some senior members of government believed deals in the minerals sector should be treated differently to other sectors because natural resources were at stake.

A report in The Age in Melbourne cited high-level sources as saying that Rio Tinto expected FIRB to impose conditions requiring key board members and managers to return from London.

FIRB extended its review of the Rio Tinto-Chinalco by 90 days two weeks ago.

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