Australia’s Senate may hold an inquiry as early as next week to scrutinize investments by Chinese state-owned companies after Aluminum Corp. of China’s bid for a stake in Rio Tinto Group.

“This is an economic question about giving another government a stake in Australian resources, our biggest wealth generator,” Opposition Nationals Senator Barnaby Joyce said in a phone interview from St. George in Queensland state. “This is not being parochial about foreign investment, it is about the ownership of Australian resources being handed to another government.”

Joyce called for an inquiry to consider tightening Foreign Investment Review Board rules and Chinese sovereign investment in Australian resources. The committee has the power to summon executives from companies and to block investments.

Chinalco, as the state-owned company is known, last week agreed to buy $7.2 billion of convertible bonds and acquire stakes in Rio projects for $12.3 billion. China Minmetals Corp. has made a takeover bid for OZ Minerals Ltd. The proposals have to be lodged with the review board, which will make a recommendation to Treasurer Wayne Swan, who has the power to reject both deals.

Swan, 54, last week moved to change the Foreign Acquisitions and Takeovers Act to allow for greater government oversight of such investments. Former Austrian treasurer Peter Costello blocked Royal Dutch Shell Plc’s bid for Woodside Petroleum Ltd. in 2001.

Needs Support

Joyce needs support from his Liberal-National coalition’s other 35 senators and from five Greens to begin the inquiry. Coalition treasury spokesman Joe Hockey and the Greens support the inquiry, the Australian Financial Review cited them as saying today.
Minerals demand has helped extend 17 years of economic growth in Australia, the largest shipper of coal, iron ore and alumina. Waning demand from its biggest trading partners of China, Japan and the U.S. may cut income from exports by 20 percent this year, the Reserve Bank of Australia said Feb. 6.

China was the biggest buyer of Australian minerals in 2007, purchasing one-fifth of the A$68.5 billion ($44 billion) worth of exports. China said on Feb. 11 exports fell last month by the most in 13 years as demand dried up in the U.S. and Europe.

‘Hurting Mining Companies’

“The global financial crisis is hurting mining companies and we need to know the ramifications of an increase in overseas sovereign ownership in Australian mines,” said Joyce, 41, who also sits on the Senate Economics Committee, which would conduct the inquiry. “No one is against foreign ownership, but if you have a dispute with a company it is very different from having a dispute with a government.”

Some 78 percent of Australians oppose investment in Australia by Chinese government-controlled businesses, according to a poll of 1,001 people by the Lowy Institute in September.

“The Senate is a master of its own destiny,” said Labor Senator Doug Cameron, who was formerly national secretary of the Australian Manufacturing Workers Union. “There are complex issues negotiated with these state funds.”

China’s Hunan Valin Iron & Steel Group is in talks to invest in Fortescue Metals Group Ltd., Australia’s third-biggest iron ore company.

Chinalco’s investment in Rio will bolster China’s bargaining power to set iron ore prices, the China Iron and Steel Association said last week. Chinalco would take 15 percent of Rio’s Hamersley iron ore unit and jointly sell 30 percent of output in China.

Export Licenses

Unions today called for the reinstatement of export licenses, Australian Workers Union spokesman Andrew Casey said. The licenses were abandoned 12 years ago to restrict Australian government intervention in markets.

“This will stop the Chinese government being able to force the price of exports down,” Casey said in a phone interview from Sydney. “The government has to act to help prevent job losses in Australian mines.”

Trade Minister Simon Crean called on China today to reciprocate by allowing for greater investment by Australian companies.

“Australians have limitations on what we can invest in China,” Crean told Australian Broadcasting Corp. radio today. “Let’s sit down and have that discussion.”

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