Chinese mining executive would rather invest in Australia's agriculture to meet China's food demand

ANDREW BURRELL

THE head of a $7 billion Chinese mining project in the Pilbara says Australia has a golden opportunity to meet China's soaring demand for high-quality food and he would prefer to invest in agriculture rather than iron ore, given the risk of falling prices for the steelmaking ingredient.

Citic Pacific Mining executive chairman Dongyi Hua told Julia Gillard and Perth business leaders yesterday that soaring demand for Australian food, particularly beef, among China's 100 million wealthy people could buffer Australia's economy from the effects of an end to the mining boom.

"Those top people, they never care about the price," Dr Hua told an In The Zone business roundtable in Perth sponsored by The Australian.

"If it's $15 or $50 a kilo (for Australian beef), they are willing to accept it."

Citic Pacific's Sino Iron magnetite project is set to enter production in September after several cost overruns and major delays.

Dr Hua said Citic Pacific had begun a cattle export operation on a pastoral property it owned in the Pilbara as part of its acquisition of mining tenements several years ago.

His comments come amid rising concerns from politicians such as Nationals Senate leader Barnaby Joyce and independent senator Nick Xenophon about increasing Chinese investment in Australian agriculture.

Wesfarmers chief executive Richard Goyder, who attended the roundtable, last month said sensitivity over Chinese investment in farms was overdone, as it remained "minuscule".

Mr Goyder has been stitching up deals with Australian farmers so that Wesfarmers' Coles supermarkets can ensure future supplies of food in the face of an expected onslaught of demand from supermarkets in China.

Dr Hua said yesterday that there was a risk that China's steel production was peaking and Australia alone could lose up to 100 million tonnes a year of supply into the global iron ore market.

"This year China will reach 800 million tonnes of steel, but those quantities can not increase every year," he said.

But Rio Tinto Iron Ore chief executive Sam Walsh said he did not expect Chinese iron ore demand to fall dramatically.

"I think the answer is we need to have the operations that are in the first cost quartile," Mr Walsh said. "We are the proximate supplier to China, we need to be the very best that we can be. I can't see a situation where the volumes that we've won, we'll lose.

"Volumes may change over time, but it will be others who lose it, not Australia because we are very well-positioned with what we supply."

Dr Hua said Australia "has to consider how to keep the economic system running well" and said China had 1.3 billion people to feed with a declining area of arable land.

"In China at the moment they are facing a problem," he said.

"So when people talk about Australia in Beijing or Shanghai, or even in the small towns, they will talk about the nice weather, lots of land and high-quality food.

"So this is really an advantage for Australia."

The In the Zone roundtable at the University of WA was also attended by Woodside Petroleum chairman Michael Chaney, Chevron's Gorgon manager Colin Beckett, ANZ state chairman John Atkins and Special Minister of State Gary Gray.

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Agriculture leak to be probed / Ministry team to investigate Chinese diplomat's link to secret documents

The Yomiuri Shimbun

The agriculture ministry will set up an investigation team within the ministry to investigate the alleged leaking of classified documents, following Wednesday's report by The Yomiuri Shimbun that a Chinese diplomat may be responsible for the security breach.

Speaking to reporters at the ministry on Wednesday, Agriculture, Forestry and Fisheries Minister Michihiko Kano said: "As long as such a report was made, I believe it's important to thoroughly investigate the case as a ministry. I told this to the team members."

The leaked documents are believed to contain information on a program for exporting agricultural products to China. The Yomiuri Shimbun reported the 45-year-old first secretary at the Chinese Embassy in Tokyo, who is suspected of espionage, was involved in the program organized by the Promotion Association of Agriculture, Forestry, Fisheries & Foods Exporting to China, a Tokyo-based incorporated body.

The diplomat, who also is suspected of violating the Alien Registration Law, has already left Japan.

Senior Vice Minister Tsukasa Iwamoto will lead the ministry's investigative team, whose members include several senior officials, such as Parliamentary Secretary Tetsuo Morimoto and a vice minister, Kano said.

The ministry's other senior vice minister, Nobutaka Tsutsui, who led the program in question, was not included in the team.

Asked about Tsutsui, Kano said, "I guess we'll have to ask him [about the leak]."

In response to the ministry's move, Tsutsui denied Wednesday that he showed or told the diplomat about the leaked documents.

Speaking to reporters at the ministry, the senior vice minister also said, "I never handed the documents [to the head of the body operating the program]."

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Exported items wasted

Under the export program, more than 3,000 items, mainly farm and marine products of Japan, were to be displayed for sale in an exhibition facility in Beijing.

According to the association, the first group of items, including 840 kilograms of rice, 88 kilograms, or 80 cans, of powdered milk and 78 bottles of sake, was exported to China on Feb. 25.

Their registration was completed on Feb. 28 in Beijing, and the products were stored in a warehouse of a state-owned firm's subsidiary, a partner under the export program.

Before February, rice exported to China from Japan needed to undergo an insecticidal fumigation process, while exporting dairy products, such as powdered milk, was banned.

However, Tsutsui, who was leading the project, reportedly explained that part of these procedures, including the fumigation, was to be waived by the Chinese side as a special measure to relax quarantine regulations.

Referring to the first group of items, Tsutsui said at a press conference in March: "Products that once needed to undergo fumigation can now be exported [to China]. This is a big step forward."

But following Tsutsui's announcement, China's quarantine authority said it was unaware of the change in the regulations, and used diplomatic channels to inquire about the matter, according to sources.

The state-owned company was then instructed by the Chinese authority to discard the Japanese products. The firm complied with this request, the sources said.

The association has been preparing for the export of more than 2,000 farm and marine products after the first group was sent in February.

However, as the first shipment ended in failure, future exports, which would be carried out in the same method as the first group, are unlikely be approved by the Chinese.

Since there are no exported items being collected for display, the opening of the Beijing exhibition facility has repeatedly been postponed, further highlighting the difficulties of continuing the program.

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