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China's Mines Are Reaching out to the International Market

Add Time: 4/21/2014 9:00:24 PM

The future success of the Chinese economy is dependent on its ability to secure long-term access to mineral and metal resources. Its dependence on coal, iron ore, alumina and liquefied natural gas is now leading to a new level of internationalization for its state-owned mining firms and a heightened need to invest in its domestic mines.

mining machines

Two recent deals highlight the aggressive nature of China's new desire to gain equity stakes in foreign firms. First was the equity purchase by China's biggest aluminum producer. By obtaining the equity stake in the UK, the giant company bypassed the requirement for international government-owned entities to seek permission from the Australian government. Overall it is a deal which has been shrouded in 'confusion and uncertainty' according to economists. The third-largest iron ore producers may go some way to alleviate concerns that if the two were to merge, the price of China's raw materials could rise.

The second deal to test the Australian government's reaction to Chinese investment was Chinese raw material processor’s hostile takeover of Australian-based iron ore and steel producer Midwest Corporation. The fact that a Chinese government enterprise would make a hostile takeover bid made the Australian government realize that the Chinese were serious about acquiring assets in Australia.

Obtaining interests in foreign firms as well as granting them access to invest in its own mining projects is now vital to China's success. China is increasingly trying to secure its own raw supply rather than being subject to the spot market. Indeed, in Bauxite alone China's imports have grown to two million tons a month.