The Australian government has told mainland companies to back off from making investments while it reconsiders the issue of national ownership in its domestic resources industry, the Australian newspaper reported yesterday.

The move recalls China National Offshore Oil Corp's failed US$18.5 billion bid for United States oil firm Unocal Corp in 2005 after members of the US Congress argued that China was using its massive surplus of export-earned dollars to buy up chunks of the American economy.

The new Australian government under Prime Minister Kevin Rudd moved to tighten regulations on foreign acquisitions of Australian companies in February after state-owned Aluminum Corp of China (Chinalco) teamed up with US aluminium giant Alcoa to take a 9 per cent stake in Rio Tinto, the world's third-biggest mining company, for US$14 billion.

The move coincided with market speculation that a mainland company was seeking to take an even bigger stake in Melbourne-based BHP Billiton, the world's largest miner, which itself had been attempting to acquire Rio Tinto. 'Since Chinalco bought its stake in Rio Tinto, BHP has been running around Canberra lobbying intensely and being nationalistic, saying we cannot sell out,' said a source familiar with the situation.

Among the mainland companies reported to have been told to resubmit applications to the Australian Foreign Investment Review Board (FIRB) at a later date is Sinosteel, which industry insiders say was preparing a bid for West Australian iron ore producer Murchison Metals on top of an earlier bid for domestic rival Midwest. 'We are currently focused on our Midwest transaction, for which we have already received FIRB approval,' said a source close to Sinosteel, without denying that Murchison was also a target.

Antam, a joint venture between an Indonesian company and Chinese metals and mining enterprise Zhonjin, is believed to have withdrawn its bid for Perth-based Herald Resources. Antam declined to comment yesterday.

Chinese enterprises have made a string of investments in foreign resources companies in recent years to satisfy explosive demand that now sees the mainland use 24 per cent of world copper, consume 33 per cent of the world's aluminium and account for more than 90 per cent of global demand growth for iron ore.

Analysts and market insiders said that the Australian government's move to stymie Chinese investment could not be justified on grounds of national economic interest and smacked of protectionism. 'This is a political issue. There can be no economic explanation behind this,' said one Hong Kong-based analyst.

'The Australian government should be welcoming investment that will help to build infrastructure and create jobs,' said an Australia-based executive at an international mining company.