Tighter Australia-China ties worry Asian neighbors

The Rudd government was particularly concerned in February, when the Chinese government-backed Chinalco Corp. bought a 9 percent stake in Australian mining giant Rio Tinto. The acquisition was part of a Chinese strategy of blocking a bid by resources giant BHP Billiton – nicknamed "the big Australian" – to take over Rio Tinto, its rival iron ore supplier. Chinese buyers fear that if the firms merged, their resulting enhanced bargaining power would enable them to further raise the price of iron ore.

The $14 billion Chinalco raid prompted Rudd to declare that he would defend the "national interest" in reviewing proposed investments by Chinese firms.

In spite of the windfalls it is enjoying, there is disquiet in Australia at the prospect of becoming China's quarry, given that China may one day challenge the military and strategic supremacy in the Asia Pacific of the US. Nor does it make sense from a business point of view for Australia to allow its biggest trading customer to own, or partly own, Australian producers.

"We're seeing a rise in resource nationalism," says Mark Thirlwell, a senior analyst in international economics at the Lowy Institute, an Australian think tank.

"It's muted in Australia, compared to countries like Russia or Venezuela, but there is still a worry about the future ownership of Australia's resource base."

IMA Asia's Richard Martin concurs. "There is unease in Australia about China, even though we've had massive investment in the resources sector by the Japanese and the Koreans for years. We're not used to a company as big and high profile as Rio Tinto being targeted."

Still, most Australians appear relaxed about the Middle Kingdom's rise. A 2005 survey by the nonpartisan Lowy Institute found that, remarkably, Australians regarded the US as a greater threat than China. The survey of 1,000 people found that only 35 percent of people were concerned about China compared with 57 percent who worried about US foreign policy, especially in Iraq.

Another startling finding was that a majority was strongly opposed to siding with the US in any conflict over Taiwan.

Australians hope they will be able to continue to have the best of both worlds – maintaining the 60-year-old alliance with the US while building a friendship with China. The latter is key to continuing Australia's remarkable 17-year economic boom. Graduate geologists with no experience are walking into jobs that pay about $112,000 a year.

Electricians, mechanics, and other skilled tradesmen are flocking to the mining states of Western Australia and Queensland. The sheer number of school graduates and young workers attracted by mining has even contributed to a recruitment crisis for the Australian Army: Too few pilots to fly the light aircraft that transport workers into mining camps.

Pension investment schemes are bulging and government coffers are swollen each year with extra tax revenue.

"Australians are pretty positive toward China," says the Lowy Institute's Mr. Thirlwell. "We're going to carry out a similar survey later this year and it will be interesting to see how the results compare with 2005. But it's hard to be resentful about people who are making you rich."

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