Coalminer puts a pin in Gillard's China win
Speaking at the ADC Future Summit on Monday night, Ms Gillard was keen to hail the successful signing of several agreements on her visit to China earlier this month, including a strategic dialogue that she described as a landmark for bilateral relations.
However, in a polite but firm speech shortly after Ms Gillard's address, Liu Xiang, the chairman of coal miner Shenhua Australia, showed the Prime Minister's foreign policy wins had yet to dislodge long-held concerns of Chinese investors in Australia.
Shenhua Group is the largest coal producer in the world and has a market capitalisation of almost $65 billion.
Mr Liu said the regulatory framework, particularly around environmental approvals, had shifted from beneath him since his company first invested in the Watermark coal project near Gunnedah five years ago.
"From our own perspective, the regulatory environment is different today than it was when Shenhua first invested in the Watermark project in 2008," he said.
The main concerns among Chinese investors have been the introduction of the mining and carbon taxes, and their perception that Chinese investors are discriminated against by the Foreign Investment Review Board.
There are reports Chinese negotiators are asking for transactions worth less than $1 billion to be made exempt from the board's scrutiny, in order for stalled free trade agreement talks to progress.
Urging policymakers to "eschew the simplistic policy choices of the past" and instead establish measures that would help Chinese investment flourish in Australia, Mr Liu made repeated references to the importance of a stable and predictable regulatory framework.
"At a macro level, the investment environment in Australia remains attractive," he said.
"However a degree of caution still needs to be exercised by policymakers so that unexpected changes in legislation and regulation do not impact investor sentiment about this market."
Shenhua has invested more than $600 million in mining exploration and acquiring properties as part of the Watermark project. It plans to spend a further $1 billion to develop the mine to produce 10 million tonnes of coal a year to feed its power stations back in China.
"Making such a large capital investment is never without risk," Mr Liu said.
"Some of these risks can be mitigated with the careful planning and appropriate financial diligence. The risk of unforeseen and unexpected legislation and regulation, however, is something far more difficult to plan for and mitigate."
Shenhua's main concern surrounds its Watermark project, which is in the early stages of approval processes at the federal and state level.
It has been met with some environmental opposition. With an against-the-odds victory against Rio Tinto by the small Hunter Valley town of Bulga last week encouraging rural communities to challenge new developments, Shenhua's worst fears are that its 3000-page environmental impact assessment dossier could be in vain.
Earlier this month, Shenhua signed an agreement with Hydro Tasmania to invest $1.6 billion in Australian wind farms by the end of the decade.
Frequently Asked Questions about this Article…
Shenhua Australia chairman Liu Xiang told investors that Australia’s regulatory environment has changed since Shenhua first invested in the Watermark project in 2008. He said environmental approvals and other rules now feel different and stressed the need for a stable, predictable framework to keep Chinese investment flowing.
According to the article, Shenhua has invested more than $600 million in mining exploration and property for the Watermark project and plans to spend a further $1 billion to develop the mine to produce about 10 million tonnes of coal a year to supply its power stations in China.
The article highlights several concerns among Chinese investors: the introduction of mining and carbon taxes, perceived discrimination by the Foreign Investment Review Board (FIRB), stricter environmental approvals, and calls from Chinese negotiators to exempt transactions under $1 billion from FIRB scrutiny to speed trade talks.
Yes. Liu warned that unforeseen and unexpected legislation or regulation is difficult to plan for and can damage investor sentiment. He urged policymakers to avoid sudden changes and create predictable rules to maintain Australia’s attractiveness to investors.
The Watermark project is in the early stages of federal and state approval processes. It has faced environmental opposition, and the article notes community actions like the Bulga victory against Rio Tinto could encourage rural challenges to new developments. Shenhua is concerned its 3,000-page environmental impact statement could be undermined by such opposition.
The article states Shenhua Group is the world’s largest coal producer with a market capitalisation of almost $65 billion. For investors, that scale means Shenhua’s investment decisions and concerns about regulatory risk can have broader implications for resource markets and foreign investment flows into Australia.
Yes. The article reports Shenhua signed an agreement with Hydro Tasmania to invest $1.6 billion in Australian wind farms by the end of the decade, showing the company is diversifying some investment into renewables alongside its coal projects.
Liu urged policymakers to 'eschew the simplistic policy choices of the past' and instead establish measures that support a stable and predictable regulatory framework. He argued that careful planning and regulatory certainty would help mitigate investment risk and encourage Chinese investment in Australia.
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