Rapid industrialization and an acute shortage of natural resources at home have turned China into a voracious acquirer of overseas mines. Australia has emerged as a favorite destination for Chinese investors because of its abundance of minerals and its welcome for most foreign investments.
The Australian dollar nearly reached parity with the United States dollar this summer as investors saw it as a way to bet on Australia's commodities boom. Rising Australian exports of iron ore, coal and other natural resources, particularly to China, had prompted Australia's central bank to raise interest rates repeatedly, making the Australian currency even more attractive for investors.
But the currency has plummeted this autumn as commodity prices have fallen and as Australia's financial services and real estate sectors have run into difficulties during the global financial crisis. The Australian dollar was worth just 69 U.S. cents in Monday afternoon trading in Europe.