Australian opposition wants China deal blocked

CANBERRA (Reuters) - Australia should veto China's planned $19.5 billion investment in miner Rio Tinto Ltd RIO.AXRIO.L, Australia's main opposition Liberal Party said on Friday as political opposition to the deal continued to grow.

Opposition Leader Malcolm Turnbull said the investor, China’s state-owned Chinalco, was effectively an arm of the Chinese government and would have a conflict of interest as both a customer and influential part-owner of Australian resources.

“The Chinalco-Rio transaction should not be approved by the Treasurer in the form in which it has been presented,” Turnbull said in a speech in Sydney.

The deal between Chinalco, an aluminum maker, and Rio Tinto is being considered by Australia’s foreign-investment advisory body, which makes a recommendation to Treasurer Wayne Swan who in turn makes the final decision on national interest grounds.

Swan recently approved two other investments by state-owned Chinese firms, allowing a $438 investment in iron ore miner Fortescue Metals Group FMG.AX and approving a revised $1.2 billion sale of OZ Minerals OZL.AX assets to China's Minmetals.

An opinion poll in April found 57 percent believed Australia should resist Chinese investment in mining companies, while only 25 percent believed Chinese investment should be welcomed because it helped the domestic economy and provided jobs.

Turnbull’s comments add to the public and political opposition in Australia to Chinese investment, with the Greens, independent and conservative National Party lawmakers also opposed to the deal.

In a speech to foreign policy think-tank the Lowy Institute on Friday, Turnbull said he was concerned China would not allow any foreign company to acquire a similar stake in Chinese firms.

He said the investment was clearly strategic because it would enable Chinalco to block other parties from taking over Rio, and would give Chinalco direct influence over some of Rio’s key assets, including Australian iron ore and aluminum assets.

“The object of the Chinalco acquisition is plainly strategic,” Turnbull said. “This will give Chinalco, and hence the Chinese government, the seat of greatest influence and access to information about production, costs, pricing and marketing strategies of our second-largest resource company.”

He also used his speech to step up criticism of Australia’s Mandarin-speaking prime minister, Kevin Rudd, accusing him of being too fixated on China at the exclusion of other nations.

Reporting by James Grubel; Editing by Mark Bendeich