Illustration: Michael Mucci.

Illustration: Michael Mucci.

SPOT the double standard in these responses to two big foreign investment decisions. The first case is BHP Billiton's move to ditch the $19.2 billion Olympic Dam expansion last month. Ignoring a ludicrous attempt to blame the carbon tax, Labor and the Coalition managed to agree on one point.

BHP would be most welcome to change its mind and build the project some time in the future, both sides said. The fact that BHP is about 60 per cent foreign-owned didn't rate a mention - it used to be known as the ''Big Australian'' after all.

In the other example, Treasurer Wayne Swan approved the sale of Cubbie Station, which had been in receivership for three years, to a consortium dominated by a Chinese firm, Shandong RuYi. It is the biggest cotton plantation in the country, with huge water entitlements, so this was always going to be sensitive. As a condition of the deal, RuYi has agreed to sell down its stake from 80 per cent to 51 per cent within three years.

All the same, the approval has sparked a backlash and is threatening to tear the Coalition apart at the seams. The Liberals support Swan's decision. But rather than sell Cubbie to a foreigner, Nationals senator Barnaby Joyce is demanding taxpayers buy it.

Despite their obvious differences, Olympic Dam and Cubbie Station have a few things in common. Both are vast assets. Both have big impacts on their local communities. And in both cases, foreigners hold the purse strings.

Yet it is the Chinese-dominated deal that has generated the political hysterics.

So why does China's investment cause so much populist concern? And is there a need to be worried?

Cubbie's chairman, Keith De Lacy, says opponents of the sale are ''stoking xenophobic flames''.

But that appears too simplistic by half. A much more convincing explanation was given by Treasury secretary Martin Parkinson and his predecessor, Ken Henry, at a conference in Canberra last week. Worrying about foreign capitalists has been a long-running feature of our national psyche, they said. But while it is easy to get whipped up about ''selling the farm'', Parkinson and Henry also had a blunt message about Chinese investment: Get used to it.

As Henry sees it, foreigners have been investing their money, expertise and equipment in Australia since white settlement, and probably earlier.

Henry pointed out that before Europeans arrived, Indonesian fishermen were harvesting sea cucumbers off northern Australia, supplying indigenous people with tools to use in the fishing and processing. Ever since, waves of foreign investors have backed our key industries.

''In the past 200 years or so, this country has benefited from several waves of foreign investment - first from Europe, which helped build Australia's agricultural sector; then from the United States; more recently from our neighbours in Asia,'' Henry said.

Why the reliance on overseas? Because Australia had not saved up enough capital to fund all the available investment opportunities.

Current account deficits have been a virtual fixture since Europeans arrived. In the past few decades, the gap between national investment and national savings has been about 4 per cent of gross domestic product - close to $60 billion. To make up the difference, businesses get some of their capital from overseas. Some of this is borrowed, but Parkinson says direct investment is preferable because it means the foreigners share in the risk. It is also much harder for direct investors - unlike foreign banks - to withdraw their capital in times of financial stress.

All the same, with every wave of investment by foreigners, doubts have emerged that we might be selling ourselves short.

The very phrase ''selling the farm'' had its roots in the 1960s and '70s, during a period of heavy British and American investment. In response to these concerns, the Foreign Investment Review Board (FIRB) was set up within Treasury to check if big acquisitions were in the national interest.

Later, Japan became the worry. Some doubted Japan's vast trading businesses were running on commercial terms.

Parkinson thinks this cycle of fear has now latched onto China, which has upped investment here.

''What do we see now? Chinese investment into Australia picks up in the mid-2000s. We're at that same point, we're in a cycle,'' Parkinson said. ''Wherever you get big players in investment coming from a country you haven't previously been exposed to, you get this sort of response.''

Despite these fears, we have ultimately learned to accept foreign investment from all sorts of countries. Just look at how much pressure there is on governments to bail out the Japanese and American car makers, to stop them taking their capital overseas.

But aren't Chinese investors buying up far more than the other countries?

It is true China has been the fastest-growing source of direct investment in recent years. For all this, however, the Yanks and Brits still have a far bigger share of the assets owned by foreigners, with about 20 per cent each. China owns about 1 per cent.

Still, aren't the Chinese strategically buying our natural resources to secure their own supplies?

To some extent, yes. More than 80 per cent of the buying in the past three years has been in the mining sector - an area where China has clear strategic interests. But this is not as sinister as it is sometimes made out to be. Japanese firms have done something similar, buying stakes in our coalmines.

Another concern is that many Chinese businesses are state-owned rather than private businesses. However, state ownership is explicitly considered by FIRB when it assesses the national interest.

The fact is, Australians have had a complex relationship with foreign investors for decades. We need overseas capital to grow as quickly as possible, but we are uncomfortable when it comes form new places. This isn't just xenophobia, it is something that happens in most countries. But if we want the economy to keep growing quickly, we may also have to accept more investment from our biggest trading partner.