<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published March 2, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>China goes on a global buying spree
It inks billion-dollar deals to safeguard supply of strategic resources
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(SHANGHAI) Resource-hungry China has seized upon the financial crisis to sign billions of dollars in deals in a buying spree that is set to pick up pace and reshape the global economic landscape, analysts say.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>Precious resource: China's Minmetals offered US$1.7 billion to take over debt-laden OZ Minerals. Many are arguing that the government should use a big portion of its US$1.95 trillion foreign exchange reserves, the world's largest, to buy assets that can give China greater security </TD></TR></TBODY></TABLE>From Calgary to Caracas, China has hammered out an unprecedented series of agreements over the past month as plummeting energy and commodity prices have left once mighty producers over-extended and short on funds.
'Obviously there are heaps of opportunities out there, given the low asset values,' said Sherman Chan, a Sydney-based economist for Moody's Economy.com. 'They're assessing all these investment opportunities.'
In February alone, a US$6 billion cash injection secured up to 200,000 barrels of oil per day from Venezuela.
A US$25 billion loan also locked in 15 million tonnes of petrol a year for 20 years from Russia's Rosneft and Transneft. And US$400 million bought a Canadian firm's promising Libyan oil field.
In Australia, state- owned aluminium firm Chinalco inked the largest foreign deal ever by a Chinese company when it put US$19.5 billion into troubled Australian mining giant, Rio Tinto, to increase its stake to 19 per cent.
State-owned Hunan Valin Iron and Steel Group offered US$650 million for a 16.5 per cent stake in Australian iron ore miner Fortescue Metals, while China's Minmetals offered US$1.7 billion to take over debt-laden OZ Minerals.
'We will see more and more Chinese companies making overseas deals and they will probably also be on a very big scale,' said Shi Jianxun, a professor at Shanghai's Tongji University.
Prof Shi is part of a growing chorus within China arguing that the government should now use a big portion of its US$1.95 trillion foreign exchange reserves, the world's largest, to buy assets that can give the nation greater security.
Oil, mining and high- tech companies should be priorities, he said.
'Crude and mineral resources are quite scarce and precious to China. It's worth it to get them because these are important strategic resources that will not depreciate easily,' Prof Shi said.
The buy-up began after Chinese state banks extended a record 1.2 trillion yuan (S$271.7 billion) in loans in January as part of the government's economic stimulus plan launched late last year, Moody's Mr Chan said.
The resource acquisitions will complement other aspects of China's infrastructure-heavy stimulus plan, which is expected to lead to significant increases in resource exports in the second quarter, Mr Chan said.
Chen Bin, head of the industry department in the National Development and Reform Commission, or NDRC - the super-ministry that plans China's economy - told a briefing on Friday that the acquisitions were by companies that were acting independently and not government-driven.
But the Russian, Rio Tinto and OZ Minerals deals were financed by the China Development Bank, a policy bank with no deposit base and only deals with projects assigned by the NDRC.
Meanwhile, the head of the sovereign wealth fund, China Investment Corporation, met Fortescue executives on Wednesday to discuss financing.
China's acquisitions are also attracting close scrutiny from politicians abroad. Australian lawmakers, for instance, have raised concerns about China's state-owned entities buying into Australia's resource sector.
Zhang Ming, an economist with the Chinese Academy of Social Sciences, pointed to a range of upsides for China as it goes on its spending spree.
China's reliance on resource imports had left the country's low-cost manufacturers vulnerable when prices skyrocketed, but gaining stakes in resource suppliers will help China hedge against future price increases, Mr Zhang said.
'And the relatively low costs in the gloomy market could bring substantial profits once the market heats up,' he added. -- AFP
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>China goes on a global buying spree
It inks billion-dollar deals to safeguard supply of strategic resources
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
</TD><TD>Email this article</TD></TR><TR class=font10><TD align=right width=20>
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>(SHANGHAI) Resource-hungry China has seized upon the financial crisis to sign billions of dollars in deals in a buying spree that is set to pick up pace and reshape the global economic landscape, analysts say.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>Precious resource: China's Minmetals offered US$1.7 billion to take over debt-laden OZ Minerals. Many are arguing that the government should use a big portion of its US$1.95 trillion foreign exchange reserves, the world's largest, to buy assets that can give China greater security </TD></TR></TBODY></TABLE>From Calgary to Caracas, China has hammered out an unprecedented series of agreements over the past month as plummeting energy and commodity prices have left once mighty producers over-extended and short on funds. 'Obviously there are heaps of opportunities out there, given the low asset values,' said Sherman Chan, a Sydney-based economist for Moody's Economy.com. 'They're assessing all these investment opportunities.'
In February alone, a US$6 billion cash injection secured up to 200,000 barrels of oil per day from Venezuela.
A US$25 billion loan also locked in 15 million tonnes of petrol a year for 20 years from Russia's Rosneft and Transneft. And US$400 million bought a Canadian firm's promising Libyan oil field.
In Australia, state- owned aluminium firm Chinalco inked the largest foreign deal ever by a Chinese company when it put US$19.5 billion into troubled Australian mining giant, Rio Tinto, to increase its stake to 19 per cent.
State-owned Hunan Valin Iron and Steel Group offered US$650 million for a 16.5 per cent stake in Australian iron ore miner Fortescue Metals, while China's Minmetals offered US$1.7 billion to take over debt-laden OZ Minerals.
'We will see more and more Chinese companies making overseas deals and they will probably also be on a very big scale,' said Shi Jianxun, a professor at Shanghai's Tongji University.
Prof Shi is part of a growing chorus within China arguing that the government should now use a big portion of its US$1.95 trillion foreign exchange reserves, the world's largest, to buy assets that can give the nation greater security.
Oil, mining and high- tech companies should be priorities, he said.
'Crude and mineral resources are quite scarce and precious to China. It's worth it to get them because these are important strategic resources that will not depreciate easily,' Prof Shi said.
The buy-up began after Chinese state banks extended a record 1.2 trillion yuan (S$271.7 billion) in loans in January as part of the government's economic stimulus plan launched late last year, Moody's Mr Chan said.
The resource acquisitions will complement other aspects of China's infrastructure-heavy stimulus plan, which is expected to lead to significant increases in resource exports in the second quarter, Mr Chan said.
Chen Bin, head of the industry department in the National Development and Reform Commission, or NDRC - the super-ministry that plans China's economy - told a briefing on Friday that the acquisitions were by companies that were acting independently and not government-driven.
But the Russian, Rio Tinto and OZ Minerals deals were financed by the China Development Bank, a policy bank with no deposit base and only deals with projects assigned by the NDRC.
Meanwhile, the head of the sovereign wealth fund, China Investment Corporation, met Fortescue executives on Wednesday to discuss financing.
China's acquisitions are also attracting close scrutiny from politicians abroad. Australian lawmakers, for instance, have raised concerns about China's state-owned entities buying into Australia's resource sector.
Zhang Ming, an economist with the Chinese Academy of Social Sciences, pointed to a range of upsides for China as it goes on its spending spree.
China's reliance on resource imports had left the country's low-cost manufacturers vulnerable when prices skyrocketed, but gaining stakes in resource suppliers will help China hedge against future price increases, Mr Zhang said.
'And the relatively low costs in the gloomy market could bring substantial profits once the market heats up,' he added. -- AFP
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