Tony Abbott has given the strongest sign yet that his Government will make sweeping changes to foreign investment rules applying to Chinese state-owned companies.
Speaking alongside Australia's State premiers, the Prime Minister said he now recognised that Chinese state-owned enterprises (SOEs) had a "highly commercial culture."
China is demanding key concessions on foreign investment by SOEs as part of free trade negotiations with Australia.
"I have to say that one of the things I have learnt better over the few years is that Chinese state-owned enterprises are highly commercial operations," Mr Abbott said.
"Now they don't normally operate in the kind of way that a nationalised industry might have operated back in Australia."
"One of the points I've been reiterating time and time again here in China is that no SOE foreign investment application has ever been knocked back."
He warned reporters against generating a new wave of xenophobia.
As reported in The West Australian on Thursday, Australia is considering removing the mandatory requirement for Foreign Investment Review Board scrutiny where Chinese-controlled companies invest in greenfields projects that would otherwise would go undeveloped.
Premier Colin Barnett said he saw little difference between Chinese SOEs and private companies, saying they were good corporate citizens. Reputable and trusted Chinese SOEs and those that already have sizable investment profiles in Australia would get preferential treatment.
Mr Abbott's comments indicate the Government would treat most Chinese SOEs as if they were private companies, meaning they would likely only face FIRB scrutiny for investments above the trigger for non-government foreign investment, currently $248 million.
But the PM's comments also indicate a significant change in his thinking.
In a speech he made in Beijing as Opposition leader in July 2012, Mr Abbott was less welcoming of foreign investment by Government-owned companies.
"It would rarely be in Australia's national interest to allow a foreign government or its agencies to control an Australian business," he said at the time.
Mr Abbott will meet Chinese President Xi Jingping in Beijing on Friday evening to progress FTA talks.
He told the expo that China had invested almost as much in Australia as it had in the United States.