The comments by Treasurer Wayne Swan followed a report in The Australian newspaper that the government planned to limit sovereign funds -- investment bodies owned by foreign governments -- to 49.9 percent stakes in local firms.

The catalyst for the speculation was a Foreign Investment Review Board (FIRB) decision to place a three-month delay on Chinese giant Sinosteel's bid to buy into West Australian iron ore miner Murchison Metals.

Swan confirmed the delay but denied the government had put the brakes on the takeover, saying the foreign investment regulator was simply establishing a "firm timetable" for a decision.

He said Australia welcomed foreign investment but did not comment on the possibility of a ceiling on sovereign funds' investments.

"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," Swan told reporters.

The government earlier this year gave Sinosteel the go-ahead to puruse a hostile takeover bid for another Australian iron ore miner, Midwest.

The Australian reported that the Chinese steelmaker wanted to buy a "substantial" piece of Murchison, which is worth about 1.5 billion Australian dollars (1.4 billion US).

Chinese interest in Australia's resources sector has grown as it seeks to secure supplies for its rapid economic expansion in the face of steep price rises.

The Australian government has predicted Chinese investment in Australia could triple to 30 billion dollars this year, with the bulk of the money expected to come from state-controlled entities.

China's state-controlled aluminium company Chinalco also combined with Alcoa to buy a nine percent stake in Rio Tinto for 14 billion US dollars in February in response to BHP Billiton's 147 billion US takeover offer for the firm.

However, there have been reports that Canberra has advised some potential Chinese investors to delay takeover applications as it considers whether it wants sovereign wealth finds to control a large slice of its resource base.

Swan said on a visit to China earlier this month that Australia's foreign investment policy was non-discriminatory and aimed to ensure decisions were driven by market forces -- not external strategic or political considerations.

Opposition economic spokesman Malcolm Turnbull said the government was dithering over foreign investment, sending mixed messages to both markets and potential foreign investors.

"What we need are clear policies," he told Sky News. "The Chinese and indeed the Australian business community don't know what the key issues are for Mr. Swan.

"Is it the size of the resource companies they're buying into, or is it the (state) ownership of the foreign company? These are big issues, legitimate issues but Mr. Swan has been completely silent on them and the market is confused."

Murchison said in a statement to the Australian Securities Exchange that foreign capital would be needed to develop resources in Western Australia state's mid-west region, where the company's leases are located.

"The development of the mid-west region to date has involved significant investment from a range of international investors, including investors from Korea, Japan, Malaysia, America and China," it said.

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