VZCZCXRO5030
PP RUEHCN RUEHDT RUEHGH RUEHPB RUEHVC
DE RUEHPT #0036/01 2170946
ZNY CCCCC ZZH
P R 050946Z AUG 09
FM AMCONSUL PERTH
TO RUEHC/SECSTATE SECSTATE WASHDC
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHLO/AMEMBASSY LONDON 0007
RUEHBN/AMCONSUL MELBOURNE 0307
RUEHPT/AMCONSUL PERTH 0441
RUEHDN/AMCONSUL SYDNEY 0311
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 02 PERTH 000036 
 
SIPDIS 
 
STATE FOR EAP/ANP, EAP/CM, AND EEB 
 
E.O. 12958: DECL:  8/5/2029 
TAGS: PREL ECON EINV EMIN CH AS
SUBJECT: WA PREMIER SOOTHES CHINA, COURTS INVESTMENT 
 
REF: (A) CANBERRA 537, (B) CANBERRA 631, (C) SHANGHAI 321, (D) BEIJING 2144, (E) 08 PERTH 42, (F) PERTH 19 
 
PERTH 00000036  001.2 OF 002 
 
 
CLASSIFIED BY: Kenneth Chern, Consul General, AmConGen Perth, 
State. 
REASON: 1.4 (b), (d) 
 
 
 
¶1. (C) Summary:  Western Australia (WA) State Premier Barnett 
used a previously-scheduled eight-day China visit to turn down 
the heat after the collapse of a bid by the state-owned Chinese 
Chinalco firm to boost its share in Anglo-Australian mining 
giant Rio Tinto and the subsequent arrest of Rio Tinto executive 
Stern Hu in Shanghai.   Barnett told the Consul General it had 
been a tough visit, especially at first, with terms like 
"treachery" in the air, but that the mood had lightened as the 
trip progressed, and that business leaders like Chinalco's Xiong 
Weiping were ahead of Chinese government officials in moving 
beyond the controversy.  Barnett raised the Hu case briefly with 
the Mayor of Shanghai but exerted himself throughout he visit to 
persuade the Chinese that WA welcomed their investments.  He 
publicly criticized the Australian Commonwealth Government and 
the WA bureaucracy for failing to facilitate such investments. 
End Summary. 
 
POLITICAL TRIAGE 
 
¶2. (C) On a July 18 - 26 visit to China originally set to build 
bridges, WA State Premier Colin Barnett was forced to do triage 
following the rejection of a bid by Chinalco to boost its share 
in Rio Tinto in favor of a Rio Tinto deal with BHP Billiton (ref 
A) and the subsequent arrest of Rio Tinto executive and 
Australian citizen Stern Hu by Chinese authorities for espionage 
(refs B and C).  Barnett told the Consul General that it had 
been a tough visit.  At the beginning, the Stern Hu case, 
although not brought up in most meetings, had been "the elephant 
in the room."  The rhetoric in newspapers and broadcasts had 
been reminiscent of anti-U.S. rhetoric Barnett had heard while 
traveling in China when the U.S. accidentally had bombed the 
Chinese Embassy in Belgrade a decade ago.  Terms like 
"treachery" and "back-stabbing" were floating around.  People 
were bringing up Tibet, and the planned travel to Australia by 
Uighur Muslim activist Rebiya Kadeer. 
 
A PIVOTAL TRIP? 
 
¶3. (C) Barnett noted to the CG that he had raised the Stern Hu 
case only once, by agreement with the Australian Commonwealth 
Government, in his meeting with Mayor Han Zheng of Shanghai (Ref 
D).  He had cautioned the Mayor that if the case dragged on, it 
had a potential to cause a rift in bilateral relations.  At his 
subsequent meetings, Barnett had stressed WA's welcome for 
Chinese investment and the need for good bilateral ties.  He had 
coordinated the trip with Canberra, working closely with 
Ambassador to China Geoff Raby.  Barnett told us, with some 
animation, that it was just by chance that he had gone to China 
at a pivotal time; he could not say whether his visit had made a 
difference, but he thought things might have gotten much worse 
between China and Australia if he had not made the trip.  He was 
not trying to "play diplomat," but Chinese rhetoric had eased 
and the mood had lightened as the trip progressed. 
 
WARM WORDS FROM CHINALCO CHAIR 
 
¶4. (C) Barnett told us that Chinalco Chairman Xiong Weiping had 
spoken with him about Rio Tinto's rejection of the deal with his 
firm, telling him, "We're disappointed, but we still have a 
large investment in Rio, and we're ready to move on."  Barnett 
commented that this willingness to move on and work together was 
characteristic of the business leaders he had encountered - in 
contrast to political leaders who continued to display anger 
about the Chinalco rebuff.  After meeting Barnett, Xiong 
proclaimed that with its abundant resources, well-run economy, 
stable environment and geographic advantages, Australia was "an 
ideal place for investment."  For his part, Barnett publicly 
acknowledged Chinese displeasure with the Rio - BHP deal and 
said that while Australia-China relations were increasingly 
being defined by companies, governments also had a role:  "I 
will be taking a far stronger hand in how the companies relate 
to their major customers and the relationships between them," to 
ensure "the transition from customer to investor to economic 
partner is done smoothly."  He remarked that the prospective 
Chinalco - Rio deal had not been handled well by the 
Commonwealth government, which had avoided a decision on whether 
the deal met foreign investment guidelines until Rio had pulled 
out in favor of a BHP alliance. 
 
 
PERTH 00000036  002.2 OF 002 
 
 
SINOSTEEL HICCUP 
 
¶5. (SBU) Further complicating Barnett's trip was an unusual 
protest read by the Chinese Consulate General in Perth at an 
official pre-visit briefing, complaining about delays by the WA 
Environmental Protection Authority in approving iron-ore mining 
investments by state-owned Chinese company Sinosteel in WA's 
Mid-West region.  Sinosteel, which has been caught up in 
environmental approvals for three years, wrote Barnett that 
delays were costing the firm A$4 million (US$3.2 million) a 
month, adding that the firm had invested A$140 million (US$112 
million) in the Mid-West.  After arriving in China, Barnett said 
Sinosteel's treatment had been disgraceful, adding that his 
office was intervening, not to limit the EPA's independence, but 
to negotiate better outcomes:  "We should not be leaving our 
major trading partner alone trying to work its way through the 
maze of our environmental protection processes." 
 
WELCOME FOR CHINESE INVESTORS, SKILLED WORKERS 
 
¶6. (SBU) Later in the trip, Barnett expressed support for 
China's involvement in the multi-billion-dollar Oakajee Port and 
Rail project to bring Mid-West iron ore to the coast for 
transport overseas - a sore point for China since WA awarded a 
contract for the project to Japanese-supported consortium in 
preference to a Chinese-backed consortium (ref E) - and signed a 
memorandum of understanding with Ansteel to conduct a 
feasibility study for an integrated iron and steel plant and 
rolling mill at the Oakajee industrial estate.  He also invited 
China to take part in greenfields gas developments and 
irrigation farming in WA's Ord River region.  Addressing critics 
of Chinese investment in WA, he told them to "get over it," to 
recognize how much further China will go in the next 30 years, 
to "deal with the reality of today," and to remember when 
thinking about the nature of Chinese state-owned businesses that 
the WA government itself owned electricity, water, and transport 
businesses, concluding:  "It is Chinese investment and we should 
embrace it."  After arriving home, Barnett said he would raise 
with the Commonwealth government the need to facilitate visas 
for skilled Chinese workers in anticipation of a construction 
boom spurred by Chinese investments, prompting criticism from 
labor unions, the WA ALP, and Immigration Minister Chris Evans. 
 
 
COMMENT 
 
¶7. (C) Barnett's China visit spotlighted his ambition to exploit 
Chinese economic dynamism in the service of continued WA 
development, along the lines followed with Japan by legendary WA 
Premier Sir Charles Court in the 1970s.  Like Sir Charles's 
exploits, Barnett's plans have a visionary quality which not all 
WA business leaders find compelling.  One resources specialist 
commented to us that the notion of an Oakajee steel mill or a 
Chinese-driven Ord-Region agricultural renaissance had a 
"build-it-and-they-will-come" quality of doubtful economic 
viability.  But such visions also reflect an increasingly strong 
welcome articulated by Barnett since becoming Premier for 
Chinese involvement in the WA economy (ref F).  One journalist 
commented that Barnett has ramped up his pro-China rhetoric to 
its strongest level yet - something that will surely be 
controversial in the context of growing strains between 
Australia and China over issues ranging from investment and 
strategic planning to human rights.  Barnett is betting big that 
for the long haul, his ambitious agenda with China, reflecting 
the independent spirit and economic vitality of WA, will pay 
off.  End Comment. 
CHERN