China Ink, Energy & Resources

A bitter Pilbara to swallow

The proposed $19.5 billion Rio Tinto-Chinalco tie-up has collapsed.

A bitter Pilbara to swallow

A victory for the politicians
or for the Rio shareholders?

A victory for the politicians or for the Rio shareholders?

A distinction that seems to have been lost in translation, as far as most of the Chinese press is concerned. Perhaps the reality of extensive state shareholdings in Chinese companies confuses the issue.

But the Oriental Morning Post was especially angry, railing at unidentified mischief-makers in the US and the UK as malign influences on the Australian government.

Rio Tinto had behaved like a “dishonourable woman”, huffed Xinhua. “Once she loved the money in Chinalco’s pocket but she actually did not love the man himself.”

The Australian press highlights their government’s insistence that the deal’s failure was a commercial matter. But it thinks too that Rudd must have been relieved to dodge the decision on whether the bid was in the ‘national interest’.

The Times in the UK asks whether, after the blocking of the Unocal bid four years ago, Beijing might start to wonder if there is a conspiracy to block it from buying Western resources companies.

Other columnists focus more on the improving market conditions, which made the Chinalco offer increasingly unappealing. The upturn also allowed Rio more options, including the much clearer business logic of a tie-up with BHP.

Could the deal have gone differently?

Li Dao Kui, professor at the School of Economics and Management at Tsinghua University, tells the Beijing News that Chinalco waited too long and failed to press home its early negotiating position.The National Business Daily agrees that, once Rio was able to find an alternative, the deal was dead.

The Global Times is more concerned with learning from the disappointment. State-owned enterprises are also going to have to accept the fact that they have a public relations problem, even if the fear of a Chinese government threat is an irrational one.

Yao Shujie, head of the School of Contemporary Chinese Studies at the University of Nottingham tells the Financial Times that China will take the lesson that it “needs to be brutal” in getting future transactions through.

The Melbourne Age also asks whether former Chinalco president Xiao Yaqing might be at fault. The use of fully state-owned Chinalco as the bid vehicle, and Xiao’s own promotion to the State Council just as the bid was being announced, reinforced the view that this was a government grab for overseas assets.

Turbulent times ahead?

They only want to sell China the trash is the view of the Beijing Business Times.

And with feelings hurt, the potential for future bitterness looks high, especially as the iron ore price negotiations drag on. Rio’s switch of affections to BHP and a joint venture in the massive Pilbara field in Western Australian doesn’t help either as it seems to confirm Chinese fears of the monopolistic instincts of the ore producers. The Chinese press suggests that Chinalco looks elsewhere for its next deal.

Australia would be wrong to think that it can just “get back to growing rich by selling rocks to China from a comfortable distance”, says John Garnaut in the Sydney Morning Herald.

Reuters agrees that China will look at the Chinalco failure in a wider context in which Western governments appear to be saying “Please, please buy our bonds, and bits of our bankrupt car companies, but keep your hands off our big natural resource companies.”

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