Chinese firms' foreign investments: Sino-Trojan horse - United Kingdom

Chinese firms are finding new ways to buy access to foreign resources

THE government of China and the large natural-resources companies it controls have made little secret of their hunger for foreign assets. But using their overflowing coffers to make acquisitions has not been easy. In 2005 America’s Congress objected to the efforts of the partially state-owned China National Offshore Oil Corporation (CNOOC) to buy Unocal, an American rival. Chinalco, a state-controlled aluminium firm, has stirred up opposition in Australia with its bid to enlarge its stake in Rio Tinto, an Anglo-Australian mining giant. No wonder big Chinese firms with government ties have been looking for more oblique and less obtrusive ways to expand abroad. A deal unveiled on May 24th, in which PetroChina, another partially state-owned oil firm, will buy a big stake in Singapore Petroleum, a refiner, hints at a new tactic.

Although producers are particularly eager to drum up investors amid the credit crunch and the accompanying sharp fall in commodity prices, national governments are leery about approving outright acquisitions by Chinese firms. One reason is a lack of reciprocity: although China complains about nationalist impediments of the sort that blocked the Unocal transaction, it tolerates little involvement by non-Chinese companies in its own energy industry. ...