China shops for overseas investment in resources

China is looking abroad as it eyes long-term supplies of natural resources. Indications are that Australia ranks high on its list of prospects. Delegations have already visited Canada, North America, and Australia to discuss joint ventures and investment possibilities. Similar missions may be in the works to Africa and Southeast Asia.

The moves come after the China International Trust and Investment Corporation (CITIC), the body that handles foreign investment inside China, was empowered by China's state council to make investments abroad.

It also follows the growth in China's reserves of foreign exchange, which were recently estimated to be more than $10 billion.

If China does invest in an overseas project, it will be the first time it has participated directly in an industrial project in a capitalist country.

The first sign that Peking may be considering investing abroad came earlier this year, when Premier Zhao Ziyang hinted that China was considering investing directly in Australia. But it seems that tentative discussions about investment possibilities have been carried out with some countries over the past two years.

China is not short of natural resources, but for a variety of reasons it is eager to secure a stable supply of iron ore, aluminum, paper pulp, fertilizer, and fishery products.

During his recent tour of Australia and New Zealand, the premier was accompanied by the deputy general manager of CITIC, Jing Shuping, who had talks with several Australian mining companies about investing in an Australian iron ore project. This would be done either by buying a substantial shareholding in a company or by participating in the development of a new mine.

China needs to secure a long-term supply of high-grade iron ore for its largest steelworks, currently under construction at Baoshan, near Shanghai.

The project has been beset by delays and difficulties, but is now expected to have its first stage in operation by 1985. While China already has large reserves of iron ore - estimated at 444 billion tons - the ore's low iron content means it is not feasible for use in the works. But Australia's high-grade iron ore could be used directly in the plant's sophisticated equipment. Three Australian mining companies have put partnership proposals to CITIC during Mr. Jing's visit to Australia. These are now under consideration.

It is also believed that talks were held in New Zealand on the possibility of a joint venture in the paper pulp industry.

Faced with a serious deforestation problem in 1980, China was forced to curtail its domestic logging activities at a time of rising demand, in which its imports of pulp and waste paper soared by 163 percent, to $188.3 million.

China's interest in investing directly in Canada is also thought to be in this area.

Mr. Jing said investing abroad was a means of securing a long-term supply of the natural resources China lacked and also a way of gaining access to advanced technology, management, and training .

''CITIC has been authorized to make investments abroad, to utilize as much foreign funds as we can afford,'' Mr. Jing said recently. ''While we welcome foreign partnerships in investments in China, we would like to invest abroad in natural resources and other goods we require. Maybe we can form joint ventures, maybe we can extend existing plants and create new ones.''

The state council also empowered CITIC, in undertaking investments overseas, to retain profits abroad at its discretion, after paying taxes.

The move by China, an underdeveloped, cash-poor country, to seek investments overseas is an indication of the strong position of Chairman Deng Xiaoping and his protege, Premier Zhao, in the Chinese leadership.

Both are advocates of China's open-door policy, which, despite such setbacks as the Hu Na emigration incident, China is pursuing vigorously. Recently CITIC opened an office in Tokyo, and last week China announced the signing of the first contracts for the development of its offshore oil reserves through foreign investment.