Uh-oh.
From China Daily, citing the official Xinhua news agency:
On Monday, spokesman of the Ministry of Commerce Yao Jian said if the revenue of the joint venture reached “a certain amount,” China’s anti-monopoly law would apply. That law requires a company to get government approval before consolidation if its global revenue exceeds 10 billion yuan (US$1.47 billion) and its revenue in China exceeds 2 billion yuan.
The JV in question is the proposed alliance between Rio Tinto and BHP Billiton, which has a “strong monopolistic color,” according to Chen Yanhai, head of the raw material department at China’s Ministry of Industry and Information Technology.
If it does prove to be monopolistic in Chinese eyes – and those government approval thresholds look worryingly low – then “we have to seek new policies and regulations to allow Chinese companies have a bigger say in iron ore pricing,” Chen added.
Indeed, the abortive deal between Rio and Chinalco is now being openly compared with the abortive Chinese bid to takeover America’s Unocal in 2005. Again, from China Daily:
“The Chinalco debacle followed the same pattern as the aborted CNOOC/Unocal deal four years ago,” Yao Shujie, professor of economics and head of the School of Contemporary Chinese Studies at the University of Nottingham, told Xinhua by e-mail.
“It not only marked the collapse of a strategic partnership between two independent trans-national corporations, it also reflected the competition and compatibility between Western powers and a rapidly growing China in politics, culture and economy,” he said.
The Chinalco debacle has aroused anger and disappointment from many Chinese. Many believed that the failed deal showed prejudice against China’s big state-owned enterprises.
But there is also an admission on the side of the Chinese that their own naivety and lack of international business experience is also to blame here.
“The speed of global expansion has given Chinese companies little practice of the pitiless reality of Western-style acquisitions,” he said…Chinalco’s failed attempt was due to its management’s insufficient understanding of the concerns of big Western resource companies, their governments, public and shareholders with China’s entering into the foreign resource sector, and of the possibility of a stock price resurgence and its consequences.
Related links:
China will learn from failed Chinalco-Rio deal – FT comment piece
How to do a resources deal Down Under — lessons from Minmetals – FT Alphaville