Proceedings of 29th International Business Research Conference
24 - 25 November 2014, Novotel Hotel Sydney Central, Sydney, Australia, ISBN: 978-1-922069-64-1
The Sequel of Chinese State-Owned Direct Investments in
Australian Coal Mining
Samantha Sin and Hans Hendrischke
“What happens to the Australian entities and assets that have been
acquired through Chinese foreign direct investments?” is the central
question asked in this research. Yanzhou Coal Mining Company (henceforth
Yanzhou), a Chinese State-owned enterprise (SOE), has made a series of
key investments in coal mining over the period from 2004 to 2012. Approval
conditions were imposed on these investments and directly impacted on
post-acquisition business and commercial outcomes of the investments.
While there is much debate and contention surrounding the foreign
investment approval process, especially for investments by SOEs, little is
known about the effects of approval conditions on post investment business
operations and outcomes. Yancoal Australia Limited (henceforth Yancoal), a
majority owned and controlled subsidiary of Yanzhou, which owns and
manages these investments is presented as a case study here.
The approval conditions for Yanzhou’s investments are first analysed
against the Australian Foreign Investment Policy (henceforth Policy) factors
for national interest considerations. Yancoal’s compliance of the approval
conditions in terms of financial reporting, corporate governance and its
share ownership composition is examined next. Finally, Yancoal’s financial
performance and financial position are analysed and compared with other
ASX listed companies in the coal mining sector. Publicly available original
documents, such as scheme booklets, corporate annual reports, ASX and
Treasurer’s announcements and corporate annual reports and documents
from ASIC, constitute the data for the research. Results from the analysis
provide empirical evidence of the actual compliance and business activities
of a key SOE in a prominent industry directly affected by the foreign
investment conditions imposed on it.
Australia while a preferred destination for Chinese outbound direct
investments in recent years is also facing intense global competition for
sourcing of capital. There is presently much debate over and advocacy for
reforms of the foreign investment regime in order for Australia to remain a
competitive destination for SOE capital. The empirical basis of this research
adds a new and critical dimension to the consideration. Noting that
protecting the national interest is the stated objective of the Australian
foreign investment framework, this research prompts a reconsideration of
the factors for national interest in the Policy, which inform the formulation of
approval conditions, to rebalance potential risks against the benefits of
foreign investments in this competitive environment.
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Samantha Si, Department of Accounting and Corporate Governance, Macquarie University, Sydney,
Australia, Email: samantha.sin@mq.edu.au
Hans Hendrischke, Business School and China Studies Centre, The University of Sydney, Sydney,
Australia, Email: h.hendrischke@econ.usyd.edu.au