Australian Treasurer Wayne Swan has approved China's Anshan Iron & Steel (Ansteel) Group's application for a stake of up to 36.28 per cent in Australia's Gindalbie Metals. The approval of Ansteel's application comes with certain conditions.

The deal will be closely followed for implications on a proposed tie-up between Aluminium Corp of China (Chinalco) and Anglo-Australian mining giant Rio Tinto.

Swan said that under the Ginadalbee deal Ansteel was required to support the development of certain infrastructure in Western Australia, including the Oakajee port and rail project.

Ansteel would also be under obligation for equal ownership with Gindalbie of a pellet plant in China. The plant would process iron ore from the joint venture Karara Iron Ore project it had with Gindalbie.

Swan said the undertakings would support Australian mining jobs and protect Australia's investment participation in the Chinese resources market.

Ansteel is China's second-largest steelmaker by output and it first put forward the proposal to buy the Gindalbie stake in December. The company was asked by Australia's Foreign Investment Review Board to resubmit the application four times in January, February, March and finally in April.

The approval was the last hurdle for Ansteel and Gindalbee for the construction of the $1.8 billion Karara iron ore venture in Western Australia.

The project will generate employment for about 1200 people during the construction phase.

Swan said that that the Chinese company's proposal would ensure that production at the Karara project would proceed. This would ensure the development of the $3 billion Oakajee deepwater open access port north of Geraldton as also the open access railway for the new iron ore province.

With many Australian mining corporates now struggling under excess debt they took on during the boom years, there is an increasing trend toward looking to investments from the cash rich Chinese investors, who seem to be only too interested in securing a toehold on resource assets abroad.

But there are also some concerns that China may end up with too much influence in a key sector of Australia's economy.

One of the most talked-about of these deals is the proposed A$25.8 billion investment by Chinalco in Rio Tinto. This deal would give the state-backed Chinalco up to 18 per cent stake in Rio, as also direct stakes in a number of Australian mines.

The Rio deal and other Chinese offers have garnered the spotlight as Swan and prime minister Kevin Rudd would have to grapple with the issue of state-controlled Chinese companies gaining ownership of Australian resource assets at a time when Australia needs investment in the tight global liquidity and sluggish commodity prices.

Ansteel had applied to up its Gindalbie stake to 36.3 per cent from 12.6 per cent, via new share placements.

The Australia China Business Council said the Australian government had taken the right decision by in allowing the Chinese steelmaker to increase its stake in Gindalbee.