Chinese investment has a role to play in the Australian economy, Treasurer Wayne Swan says.
Mr Swan's comments came after China's largest iron ore trader, Sinosteel Corp, appeared to have done a deal to buy West Australian miner Midwest Corp.
Midwest's board has recommended shareholders accept Sinosteel's $1.36 billion takeover offer.
But it is unclear whether the directors, who own 16 per cent of the company, will accept the deal for their own shareholding.
Sinosteel already holds 19.89 per cent of Midwest.
Mr Swan said the government welcomed foreign investment and did not discriminate in terms of the source country.
"As it goes to individual takeovers, I don't make comments about those at all," Mr Swan told Sky News.
"Chinese investment has got a role to play in this country but we've made it very clear when it comes to foreign investment from Chinese government entities that we will apply our national interest criteria as we do in all other cases.
"We think it's important that investment is competitive, that investment is non-strategic, and that investment is in our national interest."
China's state-owned aluminium giant Chinalco recently purchased a nine per cent stake in Rio Tinto in a move widely seen as an attempt to block a BHP Billiton takeover of its Australian rival.