Originally published by The Financial Times, 21 June 2010

By Peter Smith in Sydney

Canberra and Beijing signed 10 commercial deals worth more than A$10bn (US$8.8bn) on Monday as the two nations strengthened trade links during a state visit to Australia by Xi Jinping, the Chinese vice-president, who is expected to become the country’s next president.

The agreements, mainly in the resource and energy sectors, are small compared with a number of recent deals, including PetroChina’s decision last year to buy up to A$50bn worth of liquefied natural gas from Western Australia’s Gorgon project.

However, Kevin Rudd, the embattled Australian prime minister who is facing a backlash from local and international miners over the government’s proposed 40 per cent “resource super profits tax”, used the agreements to highlight the continued strength of the country’s natural resource sector.

“The Chinese are still active partners with all of our resource companies. There is a lot of good stuff going on out there,” Mr Rudd said. “It is important to separate the facts of what’s going on from some of the fear that is being pushed by some companies who object to paying a bit more tax.”

China is Australia’s biggest trading partner, with two-way trade surging 30 per cent to A$83bn during the depths of the global downturn in the year ended June 2009. Based on the growth trajectory of recent years, that figure could rise to A$100bn this year.

The economic relationship continues to strengthen in spite of a string of diplomatic difficulties.

Relations were strained over the arrest and jailing in Shanghai of four former Rio Tinto executives, including Stern Hu, an Australian citizen, for bribery and theft of commercial secrets.

A Chinese minister last year cancelled a visit in response to Australia’s decision to grant a visa to Rebiya Kadeer, a Uighur separatist Beijing brands as a terrorist.

Tensions have also arisen over Australia’s decision to block a number of proposed Chinese investments in Australia’s resources sector.

However, Mr Xi said Australia would remain a strategic supplier of resources to China.

“Australia, as a well regulated and competitive market and a sound investment environment, stands as an important producer and exporter of energy and resources in the world,” he said.

The deals signed on Monday include China Development Bank’s agreement to provide US$1.2bn to finance port and rail infrastructure for a new iron ore mining province in Western Australia. Fortescue Metals Group, whose founder Andrew Forrest has been a vocal critic of the mining tax, has also agreed to an engineering and procurement contract with China Gezhouba Group to “fast-track” expansion of the group’s iron ore projects in the Pilbara.

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