Australia’s National Security and SWFs

Ashby Monk

A new paper by Dr. David A. Anderson and Major Richard Mogg published in Small Wars Journal investigates the threat to Australia’s national security posed by SWFs (specifically China’s SWFs). With extensive military experience in both the U.S. and Australia, the authors provide some interesting insights into how Western armed services perceive SWFs. While the authors dampen most threats, one of their findings is potentially inflammatory:

“It appears that in the case of certain Chinese Government investments in the Australia resource industry that the intention of the Chinese Government is access to and control of resources, rather than investing only for profit.”

If true, this would leave many in Australia feeling pretty uncomfortable about China’s ongoing interest in their country’s natural resources. Nevertheless, the authors conclude:

“SWFs offer both threats and opportunities to global finance and geo-politics. As such, SWFs present a dilemma as nations want to attract the benefits of foreign investment, while also safeguarding against the threats of foreign government influence. SWF investment in Australia has offered many benefits to Australia by recycling trade imbalances and providing investment capital for development of infrastructure in the energy and resource sectors.”

2 Responses to “Australia’s National Security and SWFs”

  1. 1 rien huizer August 27, 2009 at 10:58 am


    A belated comment (have been going through past posts (I am impressed, such a wealth of literature plus interesting comments). This one is very good, because this is exactly how the informed public in Australia see China’s SOEs and SWF (s): as fully integrated instruments of a state intent on securing access to raw materials and facilitating its own exports of finished products. For instance, most observers here see behind China’s (CIC’s) intended entry into Fortescue Metals (an emerging competitor to the Rio Tinto/BHP iron ore combination currently under negotiation), in order to escape from the grip of the de facto iron ore cartel consisting of Vale do Rio Doce (Brazil), BHP and RIo. Of course it is not in Australia’s interest to assist the world’s largest buyer of Iron ore in creating a crack which has only one objective, to reduce export revenue (and gvt royalties). In addition, projects suggested by Chinese companies in Australia tend to require execution by Chinese companies. Once local content and restrictions on the temporary import of Chinese workers are raised, projects tend to evaporate. The feeling is here that China may well be testing how far it can go in using the same approach as in Africa but this time in a developed country. Whatever the merits, no one believes that CIC et al are anything but a state capitalist tool. It is unlikely that the Aus gvt will be very forthcoming in issuing the (required) foreign investment permits.

  2. 2 Ashby Monk August 27, 2009 at 2:33 pm

    Rien: I’m glad somebody’s reading the old posts! This is an interesting topic. I’ve been following the Rio Tinto fallout with interest. China seems to have been pretty upset by losing the deal.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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