2009 February 23 Monday
China Shopping For Assets

Low commodity and stock market prices make resource extraction companies a relative bargain compared to what they were 9 months ago. Eventual economic recovery will drive a rise in commodities prices. The Mandarins in Beijing see this as an opportunity. The government of China is buying into natural resources companies around the world.

The China Development Bank, for example, is financing China's biggest-ever foreign investment a $19.5 billion bid by the mostly state-owned Aluminum Corp. of China for an 18 percent slice of Rio Tinto. The Australian mining company desperately needs the cash in order to pay off $19 billion in debt over the next two years.

That deal, still to be approved by Australian regulators, is seen here as a pathfinder. "It illustrates Chinese state business's strong capacity ... and gathered experience for state-owned firms to operate abroad in the future," explained an article published earlier this month in People's Daily.

Other recent multibillion-dollar deals include the purchase by China Petrochemical Corp., the country's second-largest oil producer, of Canada's Tanganyika Oil, which works in Syria, and the bid that China Minmetals has made for OZ Minerals, an Australian zinc producer on the verge of bankruptcy.

The Chinese are making oil deals with Russia and other countries. See the full text of the article.

China is already the biggest buyer of all commodities except oil (and maybe except natural gas?). China will eventually become the biggest buyer of all commodities with no exceptions. So these moves make sense.

Share |      By Randall Parker at 2009 February 23 07:48 PM  China


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