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Foreign investment by state owned entities

CHAIR —Welcome. Thank you for appearing before us today. I invite you to make an opening statement.

Mr Edwards —I will begin with a short preamble. My major focus today will be on China, because I believe that China is easily the most potent factor in the equation and will be particularly so in the future. However, that does not discount the role of other countries and regions such as Singapore, the Middle East, Russia, Brazil and so on.

I have made 10 points for my opening presentation and I will start with point No. 10, because I believe it is vital that we understand this point. My point is that economic theories and ideologies come and go, they vary between generations, they vary between circumstances and they vary between eras, but there is one constant that is always there and it is proven by many centuries of human experience, and that is that the rich get rich by accumulating productive and valuable assets and the poor either never had those assets in the first place or they lost them or sold them to somebody. That is the route to poverty, or eventual poverty—sometimes it is quite gradual. That is the key point.

I will now go back to the list and begin with point No. 1. I do not know whether you are aware of it—my guess is that you are becoming aware of it—but there is an enormous global natural asset grab occurring. Ownership of natural assets is being increasingly dominated by sovereign wealth funds and national—that is, government owned—organisations. For example, in the 1970s some 70 per cent of the world’s oil and gas reserves were owned by large multinationals. The situation today is that an estimated 80 per cent of the world’s oil and gas reserves are owned by sovereign wealth funds and national oil companies. That is a dramatic and, I believe, dangerous turnaround in economies that are so heavily energy dependent. It is quite dangerous. By the way, this grab for natural resources is an age-old strategy that has been used for many, many centuries to achieve economic and strategic dominance. That is an inescapable historical fact.

The second point I want to make is that you can show me all the economic theories you like—they vary considerably and I am happy to explain some of them later—but history, including recent and age-old history, is a far better teacher than half-baked economic ideology. If you look back at history, all great economic powers—Britain, America, the Romans and various others—controlled assets by various forms of colonisation, some of it military and some of it economic. It is no accident, I believe, that the previously colonised countries such as China and smaller ones like Malaysia have recently limited outside access to control of their own resources while at the same time they are trying to get hold of as many assets as they can in other countries. They know what it is about.

I have handed out to you a recent release from 27 June on Business Spectator, which is probably Australia’s top real-time business news on the internet. It says that in the last week China has been accused by the US and the European Union of choking off exports of inputs that are vital to the industries of other countries. It involves something like nine of these inputs, including things like zinc. The Oz Minerals story, I think, is an interesting one to look at in relation to zinc. They have been accused of choking off supplies to other countries, thereby putting their industries in a position of duress. That has gone to the WTO in the last week. I predicted some time ago that this would happen—

Senator JOYCE —What exactly do you mean by ‘shaking off’?

Mr Edwards —Choking off. They could effectively put a choke hold on some of these things. I think what is happening in that regard is extremely dangerous, both in economic and in strategic terms. It is very dangerous.

The third thing is that the Chinese strategy appears to me to be to control the supply chain right through from the mines to the manufacturers and, in that sense, to control prices at the same time. There is evidence for this in the accidental statement made by the official of the China Iron and Steel Association that they were setting out to disrupt the relationship between BHP and Rio with a view to making sure that prices did not go the way they did not want them to go. Another example, I believe, is the attempt by the Chinese to gain control of the Midwest iron ore region. They have got control of one of them—Midwest. The other one, Murchison, they have not yet got control of—at least, not when I last looked. A third example, if you look at the Rio-Chinalco deal, is the 600-page side agreement that Chinalco had with Rio. Robert Gottliebsen, Australia’s top finance journalist, analysed it and he found that it gave them very considerable say over the way Rio was going to be run. I think that is extremely dangerous.

The fourth thing—while we cringe here and worry about whether we are offending China—I personally think that China is growing more hard-nosed and arrogant as time goes by and I find some of their hypocrisy quite offensive. While they are accusing other countries of protectionism, which they have done, the very words they used were ‘financial protectionism’ and of monopolisation, at the same time they are severely limiting access to their own assets particularly in areas such as natural resources. In other areas like the Coca-Cola case where Coke tried to take over their main juice producer they used some of their recent legislation on monopolies to block that.

Another one that has got considerable relevance to Australia is the area of rare earths. China currently controls something like 60 per cent of the world’s rare earth reserves. It produces close to 90 per cent of the processed rare earths in the world and if that is not a monopoly position, I do not know what is. Yet this flies completely below the radar of things like the ACCC if you are talking about competition or monopolies. Completely below the radar, it has taken over Arafura Resources, which is involved in that, but, more importantly—and I do not know whether it has achieved it yet—it is trying to get control of, I think, something like 51 per cent of the Lynas Corporation, a listed Australian company. The Lynas Corporation just happens to own the largest undeveloped deposit of rare earths in the world and China is going to get a controlling interest in Lynas Corporation, if it gets its way.

The fifth thing I want to say is that the Chinese government claims independence for its entities whilst at the same time it is actively orchestrating coordinated global takeover activity. You will see that in one of the things that I have given you. It is ‘China’s M&A grand strategy’. I gave that for copying. What it points out, and it is just very recent, is that Beijing’s National Development and Reform Commission says that Chinese companies—that is not just government owned entities but Chinese companies full stop—must clear foreign takeovers with central authorities first so as to combine corporate and national strategic planning interests. In other words, China Inc. is a reality; it is not a figment of someone’s paranoid imagination.

The sixth thing that I want to say is that the Chinese government currently is funnelling huge wads of money via state owned banks to Chinese entities to enable these takeovers. There was a lot of money, if I remember correctly, funnelled into Chinalco. These are huge sums of money. The seventh thing is that there is a danger I believe that the Chinese government will use the beachheads that it establishes here, when it takes over things like OzMinerals for example, as a conduit to funnel in huge amounts of its foreign reserves to enable the rapid take-up of Australian assets in the form of mining leases and so on. I think that is an immense danger.

The eighth point I want to make is that I believe the national interest test is a very weak instrument. I think it is not properly administered for a start, but I think it is a very weak instrument. What I would like to point out to you is that the acid test of a truly strong economy—not a make-believe strong economy—is its ability to consistently run current account surpluses. We have not even looked like running one since we had deregulation in 1983 and I think that speaks volumes far louder than what any red herring type economic analysis does. I must point out too that that is in spite of a massive amount of foreign capital coming into this country and a massive boom, which we have just been through, and we still have not been able to run a current account surplus. That’s life. The problems of course are two-thirds due to the net income deficit which is a mixture of interest payable on foreign debts and dividends payable to foreign owners of our resources.

As for No. 9 and some of the specific issues that I have—which I think I spelled out to a limited degree in my submission—I think that as soon as you get ownership by things like Chinese-government-owned entities of mining assets you will get life-of-mine contracts. The output from that mine will be tied up completely for, say, China’s interest, and nobody else’s. I know, for example, that they are running around trying to do business here. A good friend of mine is the biggest shareholder in a listed Australian mining company and they are trying to tie up a life-of-mine contract and they do not even own the company.

The second thing—which the previous people who were on today mentioned—is vertical integration. I believe that it is a serious mistake in terms of pricing to let customers get control of producers, and that is of course what is occurring.

The third thing is—as the people who are here earlier pointed out—that mining is a very capital-intensive business. In fact the level of employment, say, in an underground mine might have labour amounting to a maximum of about 30 per cent of the total costs. If you are talking about a large open cut, maybe labour is no more than 10 per cent, and it can be less than that actually. So you are not really getting a great spin-off in terms of employment.

The second thing about that is that a lot of the capital equipment they use is actually imported. So we are not really gaining much out of that as well. I am concerned also that they will end up using equipment and services imported from their own countries. They will promise to do otherwise but I do not think those promises are worth much. In fact at the time of acquisition people will say anything in order to get approval, and as soon as they get below the radar things change. It happens with private companies; it will happen with places like China. There is also of course the ability to use transfer pricing, which I am sure you are all familiar with, and which I think is very likely to happen.

The final thing amongst the specific issues that I would like to raise, and I will raise it briefly, concerns Chinese business practices. I was interested to see a very recent study which has just been released, a 420-page study, by the African Labour Research Network. It looks at the Chinese operations throughout a good deal of Africa. I will just read you, very briefly, one of their conclusions. The report says:

Chinese companies are among the worst employers in almost every African country the study looked at. African workers are going back to the same horrific working conditions that their fathers suffered under colonial rule.

I think that that should not be treated lightly. I think it may tell you something about the sorts of business practices that we could expect.

I will close with my tenth point again. Economic theories and ideologies come and go. They change between generations, between circumstances, between eras. But one thing does not change and that is that the route to riches is in owning productive and valuable assets. The road to poverty is littered with people who either never had them in the first place, or sold them, or lost them. And that is all I would like to say.

CHAIR —Very wise words, Mr Edwards. Mr Butler, do you have anything that you would like to add by way of an opening statement before we go to some questions?

Mr Butler —Thank you, Mr Chairman, for giving me the opportunity to be here. I am here as a layperson, a citizen of Australia. You have my original submission—


Mr Butler —and my concerns are pretty much covered in that. I am not going to try to give you a five-minute paper on economics—that is not my primary area of expertise—but I am concerned for the country. One of the reasons I would not attempt to give you a lecture anyway is that I thought that the many things I have heard spoken about this morning were self-evident. They were about selling the farm, if I can put it all into that basket. I thought that we all understood the pitfalls in that. I go beyond that and say, okay, I think we should all understand that without my having to try to spell it out again.

What do we do? Yes, we want foreign investment, I suppose, but shouldn’t we be looking at how we control it, how we regulate it? Shouldn’t we be asking perhaps whether there is a need for this particular investment to take place? Is that in our interests? Do we need another mine? Does Australia need it—not does China need it? If we do need it, why? What are the benefits to us?

If we decide that, yes, something like this should go ahead, under what circumstances? How do we ensure that Australia gets the benefit? Obviously we are not the only people concerned about that. This is a worldwide issue. The OECD in recent years has been looking at the very issues that we have been discussing here and they are concerned with the ability, particularly of sovereign wealth funds, to distort markets in the interests of their own governments. That applies to other government owned entities as well. So we need to look at how this can happen and what we can do about it. I do not pretend to have the answers to that but this is my starting point: how do we control it all, or to the best of ability?

I see the Treasurer has guidelines for foreign government owned investments and No. 1 is: ‘An investor’s operations are independent from the relevant foreign government.’ Frankly, I find that laughable. I have yet to see a state controlled entity—and I have seen many—that does not answer to its owner. This is true in commercial practice as well. All companies answer to their owners. It is particularly true of government owned entities. It always happens. So that, as a control, is nowhere near adequate. Those guidelines need a lot of work, and really what I am here to say is that this selling off of the farm, as a generic term, is obviously not good, we all know that, and we have to work out how we control it. How do we say: is this in the interests of Australia; do we need it; should we allow it and, if we do, under what circumstances and controls and how do make sure it actually benefits Australia and me and you as Australian citizens? That is about all I have to say, Mr Chairman.

CHAIR —Thank you, Mr Butler. You just referred to the Treasurer’s six guidelines, which do require independence from a relevant foreign government. How would you amend them? Would you totally ban investment in Australia by entities in any way associated with a foreign government? How would you like to see these amended?

Mr Butler —I would not attempt to give you new wording for that because it is so inadequate, in my opinion. I was trying to say that, if you are going to address the question of whether an investor’s operations are independent from the relevant foreign government, the answer to that is self-evident: they are not independent; they cannot be. So is that really a criterion for consideration? Because the answer is always going to be that they are not going to be independent. They cannot be. It just does not happen in the real world. I have worked in different levels of government for a large part of my working life. I have seen government owned entities, private companies and individuals all seeking approvals for an investment of some kind or another: a development, an investment—call it what you like. As Mr Edwards said, basically they will tell you what they think you want to hear at the time to get an approval.

CHAIR —I suppose the rationale for foreign investment has been, though, that capital is not readily available in Australia and it brings in additional capital to facilitate development. So if we banned foreign investment where would you see us obtaining the capital for development?

Mr Butler —I would not suggest we ban foreign investment. I do not believe we can stick our heads in the sand and just hope it will go away; it will not. But I think we need to be a lot more careful than we have been in the past as to how we justify decisions. Unfortunately, it has been my experience over many, many years that decision makers come and go but the investors, the development companies, keep on coming back, and I know from experience that if they keep asking they get approval eventually. It is a pretty sad situation.

Getting back to your question of how we would change that, I think you would probably throw that one away and simply say, as I said before: ‘Do we need this? Is this to our benefit? To what extent is it to our benefit?’ If you cannot come up with good answers to that then the answer is no in that particular case.

Mr Edwards —Could I make a comment on this particular issue?

CHAIR —Yes, of course.

Mr Edwards —I pointed out in my submission that the elephant in the room which nobody really talks about is the mismanagement of the Australian economy—that is, it is far too heavily dependent on debt, including a lot of foreign debt, and consumption, and that is largely due to the financialisation of this economy, just as has happened in the US of A. I looked the other day at a copy of a 1997 letter I sent to Peter Costello. I said that they were crazy to allow the banks to borrow offshore to on-lend here for housing, consumption and other items of that sort. All you have is money flowing out—interest on a foreign loan—and virtually no income coming in as a result of those expenditures. I think that was a serious mistake. I think also that, as I pointed out then, if Australians rely on people elsewhere in the world to do saving for them then they will not save themselves, and that is exactly what has happened. I believe, for example, that the loan to valuation ratios that the banks are using need to be capped at a much lower level than they are at the moment because the extreme rise in housing prices here has severely distorted the economy and run up our debt very considerably at the same time.

The other thing I would say is that you do not have to develop everything at once. In fact, most private companies—or public ones—that expand too rapidly and try to do everything at once get into trouble. That is what has happened with some of our mining companies in recent times. It is far better to retain a far bigger percentage of equity yourself, develop at a rate that is a bit slower, build up your capital and get the major benefit yourself than to give away the bulk of it to somebody else, which is what has happened here. For example, in mining there are various estimates but it is probably at least 80 per cent foreign owned now in Australia. Telecommunications and the media sector are largely foreign owned, and so on. So are food and beverages—you name it. It is all going down the tubes.

CHAIR —Thank you, Mr Edwards. I noticed that you wrote to Peter Costello about housing investment many years ago, and I thought that was very prescient of you.

Senator JOYCE —I think the elephant in the room is political correctness. We are not allowed to state the bleeding obvious: that if we let another nation’s government come in and own the wealth-producing assets of our nation then quite obviously we cannot both be the beneficiaries of it. They are the beneficiaries of it, and you work for them—or maybe you do not work for them, in which case you are a pauper in your own country. You want to offer to your children more than the prospect of just driving a truck in a mine; you want them to actually have some sort of ownership of the mine. You cannot possibly have two people owning the mine. If the Chinese government own it, they are the beneficiaries of it and that is where it finishes.

We are looking at the Foreign Investment Review Board guidelines. There are the concerns that were brought about by the Chinalco Rio bid and the fact that Minmetals, a fully Chinese owned company—basically the People’s Republic of China’s company—will own 100 per cent of OZ minerals if that deal progresses, which means it will own 100 per cent of the second biggest zinc mine in the world, Century Zinc, which means that the job that our children will have in that mine will be to drive a truck, and that is where it will stop. So, Mr Butler and Mr Edwards, if I were to wave a magic wand so that you were now the boss in Canberra just for a day and the only place you could have any effect were on the Foreign Investment Review Board guidelines, what would you change?

Mr Edwards —I would, I think, abolish the case-by-case approach to the review of foreign investments, because I think that all that leads to, ultimately, is creeping takeover of our assets. Once you have allowed one, it is very hard to knock back the next, because they will tell you, generally, the same old story; it is very difficult to do. I really think that what needs to happen is some sort of cap in the various sectors, including key strategic sectors, such that the total level of foreign investment should not exceed a certain percentage of the capitalisation or some other criterion of that particular sector. That has been done before. For example, I know that Taiwan, when I wrote a big paper for somebody way back in 1998, had virtually no foreign ownership of the companies listed on its share market; they had pretty tough limitations on it. So it is nothing new. It is done in China at this very moment. In fact, they have created legislation in relation to monopolies which so far, according to the instances that have occurred already, like the Coca-Cola one, seems to be targeted more at keeping foreign ownership out of the place than at their own domestic operations.

Senator JOYCE —That is the Huiyuan Juice company and Coca-Cola’s attempt to purchase it for $2.4 billion. It was knocked back by the Chinese government.

Mr Edwards —That is right

Senator JOYCE —What would you do, Mr Butler?

Mr Butler —I would go back to what I said a few minutes ago. These guidelines are guidelines for how you allow something that you have already decided you are going to allow. I have indicated the first one is useless. It is just not worth having. The others are all about deciding under what rules something should operate, given that you have already decided that you want it. There is nothing in this that indicates that our government would look at an investment proposal and say: ‘Is this good for us? What do we get out of it?’ I keep going back to that. I would have a new set of guidelines in front of that that say: ‘Why is this proposed? Is it solely for the benefit of, say, China? Is it for the benefit of Australia? Do these minerals really need to be taken out of the ground?’ That is another question one should ask. So it is all about why. The first assessment of any proposal should be: why is it proposed and what are we, as Australians, going to get out of it? Then you can start to look at how you regulate it. But you have to make the decision first about whether or not you really want it to happen. You may want it because you want some foreign investment—you may want some more funds in the country—but you still have to look at what the benefit is for Australia.

Senator JOYCE —You walk down the street and everybody will use the analogy: sell the milk, not the cow. If you sell the cow you are gone—you are going to starve. Why is it that everybody, when you walk down the street, understands that? In fact, they almost crawl over themselves to tell you that. When that Chinalco thing was on, the phone would just ring hot and emails would come in. It really concerned people, quite obviously. Why do you think there is a disconnect between the bureaucracy’s and the government’s position on foreign investment in Australia and the idea of the people on the street about foreign investment in Australia? How do you see that disconnect coming about? Why isn’t it self-evident that one of the fastest growing economies in the world is China and it has terribly restrictive covenants on foreign investment?

Mr Butler —There is an easy answer to that: the people on the street have no faith in the government in making those decisions. The people on the street will say to you: ‘What does it matter what we think? The government’s going to make its decision anyway.’ In this particular case, people are pretty cynical about a Chinese-speaking Prime Minister who is very friendly with the Chinese government. That may not be politically correct to say, but you want to know what the man on the street thinks. To my knowledge, that is what the man on the street thinks: ‘What does it matter what we want? The government is going to make a decision.’ From my experience, as I said before, if developers or investors keep on asking the same question they will eventually get their approval, and the public knows that. It will happen.

Senator HURLEY —Mr Edwards, you mentioned other foreign investors in Australia and said that they were not as relevant. Certainly Chinese investment, which you concentrated on, has grown a lot fairly recently. But statistics that I have from the ABS indicate that China is indeed right down the bottom of the table, compared with other countries. In 2008 they invested $7.9 billion, compared with the United Kingdom at $427 billion and the United States at $418 billion. They were less than Malaysia and less than Belgium. Given that it is still relatively small compared to these other countries, why are you so worried about China?

Mr Edwards —For a number of reasons. I am very interested in the trajectory. If you look at the trajectory, it looks like there is exponential growth in the inroads they are making into Australia.

Senator HURLEY —Why is it so bad that they are making inroads when the established inroads made by Hong Kong, Japan, the United States and the United Kingdom are not a problem?

Mr Edwards —I think that has been amply pointed out. What you are talking about in the case of China is not only numerous government-owned bodies doing it but strategic national coordination in China of foreign takeover efforts. I think that in itself is a major danger. Another one is that they are a country that will very soon become the most powerful economy in the world, not like Japan, which never has—it only got to second place. They will easily be the most powerful economy in the world. In fact, I believe in many ways they are at the moment. They are also a big customer of ours.

The areas where they are showing most interest in buying our assets are those that involve inputs into their own economy, so that they are able to exercise a stranglehold. There is a consistency to the pattern of their investment elsewhere in the world, and that is to get a stranglehold on things, particularly natural resources.

I look at a country the same as I look at a person—you can only understand them in terms of their history. The history is not particularly good. For example, one of the provinces in China, which has a very big Muslim element, has 25 per cent of their natural resources. I understand that at the moment they are trying to, by transmigration, reduce the influence of the Muslim population in that area. I really do not think they will stop at much. They have proven themselves to be very tough minded. I saw in a recent documentary on one of the current affairs programs them shooting in cold blood numerous young Tibetans who were trying to escape across the Himalayas. As they trudged through the snow they were simply shot down. I do not believe that this is the sort of country that you want to be getting control of your assets.

I must tell you by the way that I have very close Chinese-based or Chinese-born friends. In fact, I am the guardian of the children of a woman who has come here from the People’s Republic of China. I am not anti-Chinese in the ethnic sense but I am anti Chinese government control over these things.

Mr Butler —May I make a brief comment along the same lines?

Senator HURLEY —While you are doing that, Mr Butler, I would like you to expand on what you meant by your statements about our Chinese-speaking Prime Minister being friendly with the Chinese and what that implies.

Mr Butler —I will start with that first. I was responding to a question of what the man on the street thinks. The man on the street thinks that, when the Prime Minister speaks Mandarin when we have Chinese visitors, he is not just being polite but being a bit too cosy with the Chinese government. That is what I meant. That may or may not be the case, but that is the perception around Australia.

Senator HURLEY —So what is the problem with being cosy with the Chinese government as opposed to being cosy with United States government?

Mr Butler —The United States government is not buying our resources.

Senator HURLEY —Yes, they are. Mr Butler, I just read out the figures from the table.

Mr Butler —Not to the same extent.

Senator HURLEY —Hugely more. Chinese investment in Australian was 0.5 per cent of the total. For the United States, the total is 24.3 per cent.

Mr Butler —That is today. That is going to change dramatically over the years. You have the figures and I do not, and I do not dispute them, but perhaps the United States is not buying our mineral resources in the same way that China intends to in the future.

Mr Edwards —May I ask the deputy chair a question about that? Are those figures you are quoting the current percentages of foreign ownership or are they the current purchases? There is a very distinct difference.

Senator HURLEY —They are 2008 figures from the ABS.

Mr Edwards —Are they the purchases in that year or are they the levels of ownership? Do the figures mean current purchases or existing purchases that may have been done 10 years ago?

CHAIR —I think they are relevant to that financial year, because I have seen that table as well.

Senator BUSHBY —Senator Hurley actually asked about the investment levels as well. But concerning China, Mr Edwards made some comments about the nature of the country itself. Certainly it is a totalitarian regime and that comes with a lot of aspects that we as Australians would find distasteful. What would you say about the argument that the best way of addressing the fact that it is a totalitarian regime is to encourage its development, and to foster a growing middle class would impose democratic values on the country?

Mr Edwards —I would say that that is a utopian pipedream and that it is far more important to look after your own interests first. That is what I would say.

Senator JOYCE —These figures—and to your defence, Mr Edwards and Mr Butler, you have not seen them—talk about the foreign investment in Australia from China being $7.9 billion. I can assure you that that is very passé. That figure has long since been left behind in the dust. If that were the case, even the current investment that was proposed for Chinalco I think would have been twice whatever their total investment tabulated in this is, and we have the Minmetals deal as well. So do not concern yourself; these figures are way out of date.

Mr Butler —Going back to a comment I was making before—and I got a little bit sidetracked on the Prime Minister I think—part of the answer to Senator Hurley’s question about why do not we see the Prime Minister being too cosy with United States government is that there is also a perception out there that China economically is a danger to Australia. Nobody sees the United States that way. Whether it is true or not, I am answering Senator Joyce’s question as to why there is a difference between public perception and what actually happens.

The other comment I want to make is that as a senior public servant I dealt with Chinese developers and investors. I have Chinese friends and in my own private business I have subsequently dealt with a large number of Chinese clients. Trust me, they are ruthless in business. If they want to move into Australia and control our economy, that is what they will do unless we look out for it.

Senator HURLEY —How are you proposing that the Australian Prime Minister deals with China and how do we deal with Chinese business—not deal with them at all?

Mr Butler —Sorry, I do not quite understand what you mean.

Senator HURLEY —Are you proposing that the Australian Prime Minister not deal with the Chinese government and that we do not deal with Chinese business people because they are ruthless?

Mr Butler —Not at all, no.

Senator HURLEY —People used to say this about Japanese businesses. They used to say that they were ruthless.

Mr Butler —They used to be. I do not know that they are now. I do not know whether they measure up to the Chinese. No, I am quite happy for the Prime Minister to have discourse with the Chinese government—of course, that is his job.

Senator HURLEY —But not to speak Chinese to them? Is that the problem? I do not understand where the problem lies.

Mr Butler —I did not say that, Senator. In response to Senator Joyce’s question about why it appears the view on the street is not reflected in what happens, one of the comments I made was that there is a perception that the Prime Minister is too cosy with the Chinese government.

Senator HURLEY —Well, a lot of people I speak to think that that is not a problem.

Senator JOYCE —That is his view and he is entitled to it.

Senator HURLEY —I am entitled to ask questions about it.

CHAIR —Let us not have a discussion across the table. Let us hear the witnesses, because we have to wrap up at 12.55.

Mr Butler —That is not actually my view. The reality is the Prime Minister must have discourse with the Chinese government. It is polite for the Prime Minister to speak Mandarin to the Chinese government. But I am relating to you what I believe to be a perception from the man in the street. I do not want the Prime Minister to stop talking to the Chinese government. That would be silly.

Senator JOYCE —Is it polite for him to sneak the fifth highest official of the Chinese government into our nation without informing the Australian media?

Senator HURLEY —Sneak?

Senator JOYCE —He was.

Senator HURLEY —Honestly!

Senator JOYCE —The Australian media never knew that he was here.

Senator HURLEY —That is completely absurd.

Senator JOYCE —Was it polite for them to hire three buses to put in front of the Hyatt Hotel so no-one could see them having lunch?

CHAIR —We are drifting away from the reference that the committee has. Since we are behind time, we will conclude now and resume after a quick lunch. Thank you, Mr Edwards and Mr Butler for appearing.

Mr Butler —Thank you, Mr Chairman.

Proceedings suspended from 12.56 pm to 1.31 pm