Today’s edition of the West Australian carries claims that Chinese manufacturers are winning contracts on local projects partly because they are offering vendor finance at half the rate charged by Australian banks.

Read the article here.

Pluton Resources Managing Director Tony Schoer is quoted as saying, “many local resources companies had little choice but to use Chinese vendor finance, for which money was lent by the manufacturer to buy their products, usually at half the cost of local funds.”

These claims come hot on the heels of an Australian Industry Group submission to the Federal Government, which claimed that Chinese mining companies operating in Australia were locking out Australian suppliers.  They also follow renewed coverage of the Barnett Government’s State Development Agreement with Oakajee Port and Rail that highlighted clause 3.3 of the Agreement, which Mr Barnett revealed in Parliament last year to be:

The infrastructure provider agrees with the state to use reasonable endeavours to secure the involvement of private or state-owned Chinese companies in the project in the following areas, which include:

1. the provision of railcars;
2. the provision of fabricated structural steel;
3. the provision of engineering and construction services; &
4. the provision of debt financing to meet the requirements of the project.

You can read the Parliamentary debate here.

Each of these cases contributes to a growing body of evidence that clearly indicates that Australia’s engineering and manufacturing industries have the odds stacked against them and are not playing on a level playing field.  The Chinese Government takes a very strategic and aggressive approach to ensuring their involvement in resources projects delivers work to China’s engineering and fabrication sectors, providing training and job opportunities to local Chinese workers.

Our problem is not with the Chinese Government or with any of the Chinese companies operating.  Our wish is that our State and Federal Governments would provide support to our local engineering and steel fabrication sectors, so they can compete in this distorted market.