Australia should keep more of its critical minerals inside the country despite requests from China to invest in new mines, Prime Minister Anthony Albanese has declared in a pledge to spur local industries to make batteries and other renewable technologies.

Linking national security to domestic industry, Albanese said he wanted to put public money into projects that could expand local manufacturing and recover from the loss of the big carmakers over the past decade.

The comments came in a response to a question about China’s desire for approval from Canberra to invest in big mining projects and gain access to lithium at a time of growing demand for the minerals needed for high-tech devices.

The prime minister would like lithium mined here to be processed for batteries in Australia.

“We need to not just dig it up. I want to make sure we use the lithium and nickel and other products we have to make batteries here,” Albanese said.

“That’s part of the vision of protecting our national economy going forward. I think we should be making solar panels here. I think we should be making so many more things here in order to protect our national sovereignty.”

Albanese used an address to the National Press Club on Wednesday to assure Australians he was acting to shore up national security and that this was linked to economic security and the sovereignty of local manufacturing.

He insisted Australia would maintain sovereignty over the nuclear-powered submarines to be built under the AUKUS pact with the United States and the United Kingdom, said he wanted to build up local defence manufacturing and urged the Senate to approve the $15 billion National Reconstruction Fund as a way to encourage local industry.

“Yes, it’s about our sovereign capability, it’s about our defence,” he said of AUKUS and local manufacturing. “But it is also about our industry policy, about our economy, about jobs here.”

The Coalition has rejected the $15 billion industry fund on the grounds it could be a “slush fund” and that it would be better to cut costs for manufacturers instead.

Albanese attacked the Coalition for opposing the industry fund, a $10 billion housing fund, a law to cap coal prices in order to ease pressure on energy bills, and the safeguard mechanism to require 215 big entities to reduce their greenhouse gas emissions.

The prime minister did not name China when asked about the country, and mentioned it only once in his speech on national security, saying his government had stabilised relations with it.

While the prime minister met Chinese President Xi Jinping at the G20 summit in November, and Foreign Minister Penny Wong made a landmark visit to Beijing in December, relations continue to be weakened by Chinese curbs on Australian exports. Albanese called these measures “sanctions” last May but did not repeat that language on Wednesday.

Chinese commercial investment in Australia slumped from $493 billion in 2021 to $273 billion in 2022, according to a report in December by the Foreign Investment Review Board. The report said this commercial investment was worth $56 billion in the first quarter of the 2023 financial year, a figure that puts it on track to fall in annual terms.

Lithium, cobalt and nickel are key minerals needed for lithium-ion batteries at a time of growing demand for energy storage in digital devices and electric vehicles, but global regulators have been wary of Chinese control of foreign commodities.

Chinese company Tianqi Lithium launched a $136 million bid for Australian lithium developer Essential Metals in early January, setting up a trigger for approval by the Foreign Investment Review Board. The company recommended the bid and will seek shareholder approval by April.

Another Australian company, Core Lithium, began exports to China in January.

The Canadian government ordered Chinese companies to sell their stakes in three lithium and other critical mineral projects last November, after public debate about national security.

Australian tensions with China became steadily worse when the Morrison government rejected Chinese bids for pipeline company APA Group, beverage company Lion Dairy and Drinks and construction company Probuild.

Under Treasurer Jim Chalmers, however, the government has approved China Baowu Steel Group’s ownership of 46 per cent of the Western Range iron ore project in Western Australia, a move revealed by The Australian last Saturday. Rio Tinto is the majority shareholder.

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