IF Kevin Rudd and his Treasurer, Wayne Swan, do not rule against the Chinalco bid for a big stake in the mining company Rio Tinto, and a number of its key Australian assets, they will have been overborne by Chinese intimidation. This is shaping up as a profoundly important inflexion point for Australia, geo-strategically more than economically.

There is no trace of xenophobia in this concern. Chinalco is owned by the Chinese Government and it is an agent of the Chinese Government. As such, it needs to be considered in a completely different light from potential investments by private companies, or even by companies owned or influenced by much smaller governments or by governments with fundamentally different political systems. Chinalco first got interested in Rio to block the bid by BHP Billiton. It acquired its stake in Rio in an aggressive fashion and for strategic purposes, to stop BHP.

For much of the past 12 months the Rudd Government has been telling the Chinese to keep their stake in Rio small. They have given this message quietly, respectfully, mostly in private, with the greatest consideration for Chinese face. They have also allowed the message out in semi-public ways.

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