CITIC to bank on Australia's future

Sue Green

IN the next five years Australia will play an increasingly important part in the expansion strategy of China International Trust and Investment Corp (CITIC), with its A$260 million (about HK$1.37 billion) worth of Australian assets set to double - but notnecessarily in the way Canberra is hoping.

Despite Prime Minister Paul Keating's emphasis on what Australian manufacturing and technology has to offer China, Qin Xiao, chairman and chief executive of CITIC's wholly owned local subsidiary CITIC Australia, said Australia's importance to China was as a supplier of raw materials.

Mr Qin said that when CITIC made its first investment in Australia in 1986 in the Portland aluminium smelter in southwest Victoria and set up CITIC Australia to manage that investment, the aim was import substitution. That strategy was also behind its purchase of a Canadian pulp mill and a US steel mill.

But since China's open-door policy and rapid economic growth, a huge gap had developed between the amount of resources China needed and the resources it had available.

''So CITIC decided to take CITIC Australia as a major vehicle to secure some strategic resources for the next five years, not on behalf of the Government or specific clients or users, but as a commercial company. We see there is a big opportunity,'' Mr Qin said.

''CITIC Australia used to be just a part of the whole strategy, but in the next five years we will play a major role.'' Its investments would be either through 100 per cent ownership, such as its Port Melbourne-based food import-export company Pacific Asia Merchandise International, or through joint ventures.

It was negotiating to buy into a coal mine and a meat processing plant, one through 100 per cent ownership, the other as a participant. It was too soon to give details but the deal should be final in about two months, he said.

''I think Australia is very strong in these areas. Australia is rich in mineral resources and quite developed in agriculture and has comparative advantages in the world market for primary goods,'' Mr Qin said.

''Geographically it is quite close to China and we take this whole region as one area for future development. The two economies are quite complementary - that is, Australia can supply what China needs and China can provide a huge market for Australia's economy.'' But while Australia could export technology such as telecommunications and medical supplies, it would face strong competition from the US, Japan, Europe, Taiwan and South Korea.

''Even for their primary goods Australia has not really penetrated big markets like China, Indonesia, Malaysia and India. I would suggest Australia still put their major effort and concern in the primary goods and at the same time consider how to developtheir technology,'' Mr Qin said.

He said although China's investments in Australia were generally welcomed, it still faced bureaucratic difficulties. He recommended the Australian Government ease Foreign Investment Review Board restrictions and make it easier for Chinese staff to obtainwork visas.

Australia had been slow to invest in China's stock markets, with no funds covering those markets. So CITIC Australia planned to launch one through its joint stockbroking venture with Hambros later this year, Mr Qin said.

It would cover mainly the Chinese and Hong Kong securities and equity markets.

''We may use it to make some principal investments for those companies yet to be floated,'' Mr Qin said.

He said financial services, both through the joint ventures and alone, was a growing area for his company, as was trade. Its imports and exports to and from China and other parts of Asia last year totalled $90 million.