Chinese and Australian Investments - Case Study Example

International Business Research Project-PART B By student’s Name Code + Course Name Professor’s Name University Name City, State Date International Business research Project-PART B Introduction Chinese investment has in recent years been remarkably successfully in being attracted by the Australia. In fact, Australia has been the very destination for China for the foreign investments from the mid-2000s. However, the relation related to the investments has not been without challenges. There has been some unease in Australia concerning the Chinese investments in mostly the strategic factors such as agriculture and mining. The Chinese have been having the feeling that the Australia are discriminating them by screening so much on any incoming investment applications into Australia. Although the phenomena that concern the Chinese investments in Australia is quite very new, there are some high risks that the misperceptions might trump into reality considering the cultural and geographic distances that exist between the two chief countries. Therefore, there is a need that the two countries resolve any misunderstandings as early enough in order that everything becomes normal and constructive. In arrive at this, there are various recommendations that ought to be put across to address the challenges that the two countries faces. This essay hence focuses on the recommendations to the problems of Chinese FDI in the resources sector of Australia. Recommendations The first recommendations involve the fact that Australia and China needs to manage their problems. This involves managing the challenging situation in terms of the economic relationship and the broader bilateral relationship. It should be noted quite clearly that Australia gets and is the net importer of the FDI, and this is since federation. It should be noted also that China is the greatest new source of FDI in the Australian economy. Although the Chinese investment is still small, there has been some significant development since the 2008 world financial crisis. The Chinese FDI has grown from the 0.92 percent of the entire FDI in Australia to approximately 2.63 percent in 2011. In addition, there has been some approved investment flows from China into Australia. In fact, this increased in 2008 and was followed by some downward pattern of the rise and fall in subsequent years. This continued until it surged in 2012. Therefore, it is quite recommended that the Chinese and Australia resolved their differences as it is positive in the economy and bilateral relations (Thirlwell, 2008). The second recommendations are the fact that Australia should live up to the international commitments with respect to the foreign investments. It should be noted that Australia is among the members of the Organization for Economic Cooperation and Development, and it has for a long time at the forefront of efforts to advance the international rules of the game for the overseas investment and increase the fair treatment of the foreign investors. It should be realized that the OECDs investments policies are established in its investment instruments and bases its code of liberalization of the capital movements. Therefore, it is quite capable that Australia regime is assessed against the principles. However, it should be noted that framing the current policy debate in relation of fairness is challenging for various serious (Li, 2010). The other recommendation is the fact that there is a need for balancing the community concerns concerning the foreign ownership of the assets of Australia against what the government realizes the strong economic benefits that the economy has from the foreign investments. It should be realized that the foreign investment in Australia is under the regulation of foreign acquisitions and takeovers act and also by the Australian foreign investment policy. This implies that the government should take some approaches in encouraging the foreign investment to be consistent with the interests of the community. There is a need for the breaking out of the poor interaction between the public reaction and the policy responses in Australia, including the Chinese investors and institutions adaptations. This will bring make the two countries to desist from the costly approaches to managing the risk of investments. Such current issue calls for the deeper bilateral policy conversations and also the increased transparency from the Chinese and Australian investments-related institutions. Addressing such problems must include the clarity concerning the nature of the policy issues perceived to be related with foreign investments, designing of the appropriate policy measures that deals with significant market failures, appreciation of the scope and trajectory of the SOE reforms in China and effects for the international strategy of the Chinese firms among other factors (Larum & Qian, 2012). The two countries should also tone down the perceptions that allowing the investments in Australia by the Chinese SOEs will provide the government of China some influence or control over the assets. In the fact, that has been the platform discussion on China’s political and economic system. There is a need of better understanding on the role and also evolution of the Chinese SOE and their associations with the government of China and these needs to be understood better. This calls for the understanding in order to improve the business practices, culture and institutions between the two countries. There should be scrutiny in the foreign investments in Australia. The part of FIRB’s responsibility involves giving the Australian national confidence that the foreign investments is carrying out in the national interest. There is a need for the major Australian political parties to support the foreign investments. They should not recognize the public opinions, in which case it is more negative. This implies that the additional scrutiny of the foreign investments ought and is warranted to sustain the public confidence. To respond the public concerns, there is a need for the additional FIRB policies for SOEs to capably lower the thresholds for approval of foreign investment in agribusiness and rural land. The Australian government should ensure the tensions in the investment relationships between the two nations do not have any negative impact on the broader political relationship. This will help in reducing the perceptions that the government of Australia does not welcome the Chinese investments, in which case it sends the misunderstandings concerning the investments relationships (Larum & Qian, 2012). Another recommendation involves better communication and improved engagements. One of the excellent steps that the two countries have to take involves increasing the investment relationship is to increase the levels of government engagement and communications. In fact, this would be quite constructive when there is the formalization of Australian China economic and trade cooperation forums at some government to government levels. This might include the deeper connections within the FIRB sites, the Australian treasury department and the Chinese investment related authorities including the influential think tanks and influential academics. The linkages should also be quite strong, and it should not just involve the officials of China and Australia. This is because heavy linkages will encourage active approaches to communication of investments policy changes to China, and it will give advance notice of Australian government policy. In addition to this, there is a need for the less politicized and also better informed conversations of Chinese and foreign investments in Australia. The political leaders of Australia should have a role to play in order to get some political support (Golley & Song, 2011). Another recommendation is the taking of regulatory steps. In such a case, both sides of the countries have to take steps in order that they improve the investments relationships. There is a need for an alternative, in which case it should be less direct intervention in the corporate governance at the approval stage of FIRB and more reliance on the domestic regulatory authorities of Australia to ensure there are appropriate outcomes and behaviors. A good example involves the Australian competition and consumer commission managing the misuse of market power and broader issues with the corporate governance to be governed by Australian authorities. There is a need to improve the infrastructure and agricultural cooperation between the two countries in order to solve the problems arising from the Chinese FDI in Australian resource sector. This should be seen in terms of the benefits to Australia. This can be done through the government to government cooperation on investment in two specific sectors where the Australia and China contain complementarities that include agriculture and infrastructure. The cooperation between the two governments will be quite significant to the development of the initiatives, and this is because of the regulatory complexities including the political sensitivities. The Chinese contains essential experiences in the infrastructure sector. On the other hand, Australia contains some substantial backlog of various projects, for instance those that need explicit and implicit public subsidy such roads and rails. In such cases, the Chinese government could provide the necessary resources and capital, including the considerable expertise in the infrastructure constructions. The Chinese engagement in Australian and also investments will play a significant role in developing Australian agriculture, technology, new markets and provd9ing the necessary capital (Findlay & Drysdale, 2012). There is a need for wrapping up of FTA negotiations for the Australia-China. There might be some sufficient agreements to permit the real market opening in some places in a method that would fall short of some formal FTA but that which could still constitute essential agreement. Concluding the talks that have had to take place for many years with tangible agreement will free up the economic and diplomatic resources to create some higher return relationships with China. Australia should not stop the foreign into certain industries just because the China does it. Continuing on the reciprocity as the precondition for actions of Australia would have stopped one of the significant Australian economic reforms of the late 1900 tariff deductions (Daojiong, 2013). Conclusion In conclusion, the government of Australia intends to provide some great chance for the wide ranging response to the challenges and also opportunities in the bilateral Australia-China investment relationships. The response of the government should ensure that there is a more consistent welcome message to China concerning the investments and also some stronger mechanism to proactively devise the way forward in government investments policies and decisions. The response of the government should also involve the initiatives for investments cooperation with the country of China in all the areas that the project has had to suggest. List of References: Daojiong, Z. (2013). Chinese FDI in Australia: Drivers and Perceptions. Retrieved on 4th September, 2013 from http://lowyinstitute.org/publications/chinese-fdi-australia-drivers- and-perceptions Findlay, C & Drysdale, P. (2012). Chinese Foreign Direct Investments In the Australian Resource Sector. Retrieved on 4th September, 2013 from http://epress.anu.edu.au/wp- content/uploads/2011/06/ch162.pdf Findlay, C & Drysdale, P. (2008). Chinese Investments In Australian Resources. Retrieved on 4th September, 2013 from http://www.eastasiaforum.org/2008/09/04/chinese-investment-in- australian-resources/ Garnaut, R., Song, L., & Woo, W. T. (2009). China's new place in a world in crisis economic geopolitical and environmental dimensions. Acton, A.C.T., ANU E Press. 353 Golley, J., & Song, L. (2011). Rising China global challenges and opportunities. Canberra, ANU E Press. http://epress.anu.edu.au/titles/China-update- series/China_update_2011_citation/pdf-download. 186 Hurst, L. (2012). Chinese Direct Investments in Australia: Public Reactions, Policy Response, Investor Adaptation. Retrieved on 4th September, 2013 from http://www.eaber.org/sites/default/files/documents/Chinese%20direct%20investment%20 in%20Australia%20- %20By%20Luke%20Hurst,%20Peter%20Yuan%20Cai%20and%20Cristopher%20Findl ay.pdf Larum, J & Qian, J. (2012). A Long March: The Australian-China Investment Relationship. Retrieved on 4th September, 2013 from http://acbc.com.au/deploycontrol/files/upload/news_nat_fdi_report_oct.pdf Li, X. (2010). China's outward foreign investment a political perspective. Landham, MD, University Press of America, Inc. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A N=594276. Roy, K. C. (2006). Growth, development and poverty alleviation in the Asia-Pacific. New York, Nova Science Publ. Thirlwell, M. (2008). Is the Foreign Investment Review Board Acting Fairly? Retrieved on 4th September,2013 from http://www.ipa.org.au/library/publication/1229471411_document_thirwell_updated.pdf Read More