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Rudd says SWFs to face greater scrutiny in Australia

Investments in Australia by foreign sovereign wealth funds (SWFs) will face close scrutiny, Australian Prime Minister Kevin Rudd said yesterday in the wake of China's move into mining giant Rio Tinto.

While stressing that he was not commenting specifically on "current moves on the part of particular companies," Rudd said he wanted to talk to Beijing's leaders about China's future plans for investment in resources.

"How do we fashion this long-term energy and resource relationship between our two countries?" he asked in an interview with the Australian Broadcasting Corp.

"China does depend on reliable sources of supply from Australia in a whole range of commodity areas," he said.

"This will continue into the future and what I want to talk to the Chinese leadership about is what's their long-term strategy, and what are this country's long-term strategic interests as well," he said.

China's insatiable hunger for resources to fuel its rapidly growing economy has driven a mining-backed boom in Australia in recent years.

State-owned Aluminum Corp of China (Chinalco, 中國鋁業), acting with US-based Alcoa Inc, bought 12 percent of the London-listed shares of Rio Tinto, the world's third-biggest miner, for US$14 billion in a sharemarket raid earlier this month.

Rudd said at the time that Chinalco's application to move to a 19.9 percent stake in the Anglo-Australian miner would be assessed on the basis of national interest.

On Sunday, Treasurer Wayne Swan outlined the foreign investment guidelines which a government-owned group would have to meet in taking major stakes in Australian companies.

The SWF would have to show that it could not be manipulated by its political masters and would not be allowed to acquire assets crucial to Australia's national security.

SWFs shot to prominence through their asset buying spree on the back of an oil price boom in the Middle East and export-driven surpluses in East Asia.

The spotlight is on the fledgling, cash-flush China Investment Corp Ltd, which US lawmakers fear could snap up strategic assets and threaten US security and sovereignty.
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