After Rio Tinto announced last Friday that it would walk away from a US$19.5-billion (134.4 billion yuan) investment by Aluminum Corp. of China (Chinalco), no one is more eager to avoid possible criticism from China than the Australian Prime Minister Kevin Rudd.

In a hastily arranged meeting with Chinalco chairman Xiong Weiping late Friday night, Rudd stressed that Rio Tinto's decision was its own. Australian Treasurer Wayne Swan made similar statements.

Their good will is easily understandable, but the explanation has shied away from the real fact. Rio's decision, though closely related to various economic factors, was not completely detached from political intervention, to which Rudd himself has also fallen victim.

Since he was sworn in as prime minister in 2007, the opposition has been looking impatiently for any possible opportunity to tarnish him.

Nothing better serves this purpose than labeling him a puppet of China. The country's rapid rise is often a topic of scorn among some conservative Australians who have fallen sway to the fear-mongering of political groups whose survival depends largely on the instigation of economic nationalism against other countries.

Rio was struggling to keep a delicate balance between the economic benefit from China and the possibility of the agreement not being ratified by the government if it was confronted with strong nationalistic opposition.

When the need of money outweighed the nationalistic pressure, Rio chose to sign the agreement; but when the economic situation changed and the latter outweighed the former, it chose instead to break the agreement.

There is no winner in this game. Chinalco has to make immense adjustments in its global investment strategy. Rio’s irresponsible decision will strike a heavy blow to its credit record and global image. Meanwhile, Rudd and his government may be seen by insiders as easily bullied by the opposition and by domestic political pressure.

Nor are those who played the card of nationalism a real winner. Haunted by the dark clouds of economic nationalism and vehement hostilities towards outsiders, Australia will inevitably lose some appeal to foreign investors. It will not be too long before Australians realize what these fear mongers have brought to their country and its citizens. Nor will it be too long before they are held accountable by the public for the consequences of seeking partisan interest at the expense of Australia’s investment climate and their country’s job market.

China’s enterprise managers and government officials need to gain more experience in overseas investment and how to identify and deal with potential political risks in the host country.

Above all, investors need to conduct a detailed analysis of the host country’s political ecology, a key element of the investment climate. Remember that when your money is invested in another nation, you need to deal with not just its top government, but also local governments, parliament, opposition parties, NGOs, tribes and religious leaders, each of which may affect the result.

It is also necessary to foster a better understanding between the home country and the host country, both for the sake of their governments and their peoples. In this sense, non-government diplomacy is by no means less important than government diplomacy, as a better understanding between different peoples underlies a friendlier atmosphere that is vital to the success of business cooperation.

(globaltimes.cn June 10, 2009)