The Australian government is closely watching both domestic and international developments surrounding takeover interest in Australian resources company Rio Tinto although the Finance Minister Lindsay Tanner refuses to speculate on any outcome.

The government led by Prime Minister Kevin Rudd has released guidelines for foreign government-related investment proposals, indicating it will look more favorably on proposals from entities that have clear commercial objectives and operate at arms length from their country’s government.

The release of the guidelines comes after Aluminum of China, also known as Chinalco, and Alcoa recently complicated BHP Billiton’s bid for Rio Tinto by buying up a 12% stake in Rio Tinto’s London-listed stock, representing 9% of the whole group.

The Chinese group has submitted a voluntary application to Australia’s Foreign Investment Review board for approval of its investment in Rio Tinto, although Chinalco President Xiao Yaqing said earlier this month his company has no plans to increase its stake in Rio Tinto.

Earlier this month, BHP Billiton made a bid for its mining giant rival that values Rio Tinto at $163 billion.
Source: Sydney Morning Herald

Chinalco has invested in Rio Tinto in Australia to the tune of $15.5 billion. Chinalco chief Xiao Yaqing visited Australia to reassure the locals that it had no intentions of taking over Australia. This did not stop the Australian press running the story as a warning of what could happen to Australia. And in those stories there was, regrettably, a racist element.

To quote The Age, which was more restrained than the rest, ‘Of course, it’s just two words that strike fear about Chinalco — ’state-owned’.’

Prime Minister Kevin Rudd flick passed the responsibility to the Foreign Investment Review Board for discussion.

The Rio share purchase, was made through a Singapore-registered company called Shining Prospect, and gave Chinalco 12% of Rio Tinto.

On its site Chinalco reveals: ‘Aluminum Corporation of China Limited, which is under the care of Central Party Committee and the support of various ministries, native government and party committees. . . . Aluminum Corporation of China is an investment management institution and holding company authorised by the state. It is one of the key state enterprises managed by the Central Government directly.’

Now the rumor is that the Chinese Government has provided Chinalco with ‘a $US120 billion war chest — a $US120 billion financial reserve in support of the company’s bid for Rio Tinto, against BHP Billiton’.

Then came the sting in the tale which showed, clearly, the Australian attitude towards investment by China. ‘Little wonder Mr Xiao turned up in Sydney with such a fine wardrobe of Italian suits.’

Such a comment has never been made about, say, an executive of Microsoft coming to Australia to view the software scene it totally dominates. Nor would it have as a heading: ‘Rio stake could be first step in a long march.’
Source: The Age

Chinese share prices closed about 7% lower as investors dumped stocks after last week’s sell-off on Wall Street amid lingering fear of a US recession.

On Friday, the Dow Jones Industrial Average fell 1.38% to 12,207.17, ending a two-day rally boosted by the US Federal Reserve’s emergency federal funds rate cut of 0.75 percentage points.

China’s main stock index plunged 7.19%, its fourth biggest drop this decade, because of sliding global markets and heavy snow across central and eastern China, which is disrupting food and energy supplies.

The benchmark Shanghai Composite Index, which covers both A and B shares, plunged 342.39 points. The fall neared last Tuesday’s 7.22%drop, the highest percentage points loss in 7.5 months.

A Bohai Investment analyst said the once isolated domestic market was now more influenced by other world markets.

He added there was little buying interests as investors expected the US subprime mortgage crisis wouldn’t be tackled in a short time.
Source: China Daily