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Report calls for better China links

AAP logoAAP 15/08/2016 Paul Osborne, AAP Senior Political Writer

A major new report into Australia-China relations has called for more to be done to ease public concerns about foreign investment and give Chinese investors "equal treatment".

The Australia-China Joint Economic Report - handed to Prime Minister Malcolm Turnbull and Chinese Premier Li Keqiang on Monday - is the work of the Australian National University and the China Centre for International Economic Exchanges.

The 300-page report, co-edited by ANU's Peter Drysdale and the CCIEE's Zhang Xiaoqiang, sets out a plan to improve co-operation between the two countries and deliver significant economic and social benefits.

It says the China-Australia free trade agreement should be used as the basis for a new investment agreement.

The agreement would take a "negative list" approach (identifying specific sectors where extra foreign investment rules apply), and cover the treatment of foreign investment, respect for rule of law, resource access guarantees and greater mobility of people.

However, the report warns: "This will not be achieved if the broader community does not grasp the benefits of foreign investment in both Australia and China.

"In Australia this means accepting equal treatment for Chinese investment and reconsidering attitudes towards state-owned investors from all countries.

"In China, it means building respect for rule of law to make investments secure and predictable for all domestic and international parties."

The report comes before Mr Turnbull attends the G20 summit in China next month and after a preliminary decision by the federal government to reject two Chinese bidders for the 99-year lease of NSW electricity distribution network Ausgrid.

Treasurer Scott Morrison said there were national security grounds for blocking the Ausgrid bids, which could not be mitigated against.

The Turnbull government is also facing political pressure from four One Nation senators elected on a platform of opposing foreign investment, and Nationals MPs whose lobbying has secured tighter thresholds for Foreign Investment Review Board checks.

The report also calls for a new Australia-China Commission to promote academic, cultural, policy, government, business and community exchanges.

And both governments should seek greater co-operation on the maritime economy as "maritime powers with common interests in seaborne supply routes".

Australia has expressed its concern about China's militarisation of reefs and coral atolls in the South China Sea and refusal to accept international court decisions against Chinese claims to rights in the sea.

The report suggests the two countries work more closely on such issues as transport corridors, maritime and scientific weather research and resource security.

Prof Drysdale says the economic outlook for China - Australia's largest trading partner - is positive.

With the right reforms, China could achieve annual GDP growth of around six per cent over the next decade and Australia's exports to China could grow by 120 per cent in real terms.

For China, this would depend on financial and state-owned enterprise reform, increased openness to foreign investment and capital account liberalisation.

For Australia, it would mean increased competition in sheltered industries, openness to foreign investment, and skills and greater investment co-operation on infrastructure.

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