China advances its way into the U.S.-Australia relationship

History and money link the U.S. and Australia but that’s not stopping China from shoehorning its way into the relationship at a business a level, as well as in laying the foundations for a push to replace the U.S. in a region it regards as its backyard and a critical supplier of raw materials.

A deal last week in one of the mining world’s least loved commodities highlighted the optimistic view China has of future demand for minerals, while the size of two diplomatic posts in Australia’s natural resources capital, Perth, does the same job.

The commodity which attracted a $468 million investment by two arms of CITIC (formerly the China International Trust and Investment Corporation) was alumina, particularly the mineral which eventually becomes the light metal, aluminium.

Target of the CITIC plunge into aluminium, the worst performing metal of the past 10 years, was an Australian affiliate of the Dow 30 member, Alcoa, with Citic Resources Holdings snapping up 7.8% stake in ASX-listed Alumina Ltd and Citic Group taking a 5.2% interest.

Alumina’s major asset is a 40% stake in Alcoa World Alumina and Chemicals, a company which operates three low-cost alumina refineries in Western Australia as well as having a share in aluminum smelters around the world.

The Chinese investment plunge into Alumina sends a number of signals, including an obvious demonstration of China’s ongoing demand for basic raw materials to feed its factories, and a willingness to upset what has been, until now, a cozy U.S.-Australian business arrangement.

A mile to the north, in the heart of the bustling East Perth residential and commercial precinct can be found the three-storey Chinese consulate, topped with four big satellite dishes, and linked to an accommodation block and a curious building addition which is below ground height. If size matters, the Chinese have made a bold statement with a presence that is at least 10-times that of the U.S., right down to flag size with an enormous red banner of the People’s Republic flapping proudly in the morning breeze while at the U.S. consulate a much smaller Stars and Stripes hangs alongside the Greek flag – with the proximity to that economic basket case hopefully not an omen.