The state of Western Australia only has a small population - about 10 percent of Australia - but it is leading the country's economy, due largely to the impact of the strong demand from China's industrialization.

B J Zhuang, regional director of the Western Australia Overseas Government Network in China, said the success of the relationship between China and Western Australia is based on mutual dependence.

"The well-being of Western Australia's economy is reliant on China for market growth, while the well-being of the Chinese economy depends to some extent on Western Australia for its proven internationally competitive and reliable supply of resources," he said.

China is Western Australia's biggest customer, with exports to China worth $13.82 billion and accounting for more than 60 percent of total Australian exports to China.

More than half of the exports to China consist of iron ore and concentrates. This figure looks set to grow, with Chinese firms setting up projects in Western Australia that will feed the processing industries in China.

Zhuang said that on top of its natural resources, Western Australia is an attractive investment option for Chinese businesses because of its strong and stable economy, low sovereign risk and stable government policies.

To date, 12 Chinese steel-related companies - State-owned and private - have invested in Western Australia.

China's largest airline, China Southern Airlines, has also invested in Western Australia since 1994, with its pilot training facility located there to make use of Western Australia's air space resources. About 1,000 pilots have graduated from the flying college.

All three of China's major petroleum companies have invested in or have major business arrangements in Western Australia, with PetroChina signing up during President Hu Jintao's visit to Australia in early September.

The North West Shelf project in Western Australia's Pilbara region began exporting LNG to Guangdong in May last year, under a 25-year agreement. It still remains the largest international trade deal for either Australia or China.

At the time of President Hu's visit to Western Australia, a number of other significant investments were showcased to the president.

These included plans for the first magnetite iron ore project in Western Australia between the CITIC Pacific Sino Iron Project and Fortescue Metal Group's and Baosteel's joint magnetite exploration in the Pilbara region.

This is Baosteel's second investment in Western Australia. The first was in 2002 with Hamersley Iron for the Eastern and Western Ranges Iron Ore Mine at Paraburdoo.

(China Daily 10/15/2007 page16)