Australia plays down talk of foreign buyer crackdown

By Rob Taylor and James Regan

CANBERRA/SYDNEY (Reuters) - Australia played down reports on Thursday that it might tighten foreign-investment rules to curb Chinese takeovers of local resource firms, as it emerged that China's Sinosteel was pursuing a second iron ore miner.

Various government sources declined to comment on the unsourced report in the Australian newspaper, which said the government was looking to put a 49.9 percent ownership cap on foreign sovereign firms.

The move was designed to stop Chinese state-backed firms from taking control of Australian miners, the newspaper said

The centre-left Labor government wanted to send China a message that "it can play in our sand-pit but it cannot own it", the newspaper quoted an "insider" as saying.

But Australian Treasurer Wayne Swan told reporters on Thursday the government welcomed foreign investment if it was in the national interest.

"We welcome foreign investment, we welcome it from everywhere, including from China, but we will apply decisions on a case-by-case basis in the national interest," said Swan.

Swan and Australia's Foreign Investment Review Board (FIRB) would not comment on the reported plan to cap foreign ownership.

The government said in February it would tighten scrutiny of investments into the country by state-owned funds in a sign of unease at their growing investment clout.