WAYNE Swan has approved a $644.8million investment by Chinese steel company Hunan Valin in Fortescue Metals Group, imposing conditions to overcome the sort of concerns raised about Chinalco's proposed $28billion stake in Rio Tinto.
The Hunan Valin approval comes amid political debate about Chinese investment in Australia and links between the Rudd Government and China, after Defence Minister Joel Fitzgibbon was forced to admit he had failed to disclose two trips to China paid for by a Chinese businesswoman.
Like the Chinalco bid, the Hunan Valin stake in Andrew "Twiggy" Forrest's Fortescue Group involves a customer gaining a seat on the board of an iron ore producer, with the Treasurer giving the investment approval with some conditions.
But the Chinalco bid is far more complex than the relatively straightforward Hunan Valin investment, offering the Chinese company direct stakes in many of Rio Tinto's assets.
Approval of the Chinese company's investment came as Trade Minister Simon Crean was meeting China's Commerce Minister Chen Deming in Beijing to kickstart stalled free-trade agreement talks aimed at securing greater access for Australian goods and services in China.
"The investment issue isn't just a one-way street from China to Australia, there are clearly investment issues that Australian companies want as part of a new framework for investment going forward," Mr Crean said.
Mr Swan said Hunan Valin's nominee to Fortescue's board would be forced to declare any potential conflicts of interest relating to Fortescue's marketing, sales, customer profiles, price setting and cost structures and would be forced to "comply with the information segregation arrangements agreed between Fortescue and Hunan Valin".
Those arrangements are designed to ensure the board member, Hunan Valin chairman Li Xiaowei, will not participate in discussions about price negotiations or marketing.
"These undertakings ensure consistency with Australia's national interest principles for investments by foreign government entities. They ensure the appropriate separation of Fortescue's commercial operations and customer interests, and support the market-based development of Australia's resources," Mr Swan said.
The investment will help fund the next phase of Fortescue's expansion of its iron ore mining operations in the West Australian Pilbara region.
Fortescue chief executive Mr Forrest said the approval "enhances the already strong relationship between Australia and China".
He said political critics of Chinese resource investments such as Nationals Senator Barnaby Joyce were "entitled to their views" but that Hunan Valin investment had been structured so that it would be a "model for investment from China".
The approval allows Hunan Valin to take its stake in Fortescue to 17.4 per cent, and comes as the China Minmetals Group made a revised bid for OZ Minerals after the Government rejected its proposed acquisition, the prized Prominent Hill mine, on national security grounds.
The raft of Chinese investment applications in Australian resource companies have raised political concerns.
The Senate has set up an inquiry into state-owned companies buying into Australian resource companies, which is due to start taking evidence this month.
Mr Crean said the commerce minister had sought assurances that the foreign investment decisions weren't directly linked to the FTA talks.
"What (Mr Chen) did seek assurances on was that we weren't linking these outcomes to the FTA," Mr Crean said.
"And I have assured him in that regard and he accepts that assurance because that is the position that we have consistently stated."