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China Stakes a Claim & ODI Goes Underground

China’s overseas direct investment (ODI) has been building slowly but surely, as reported here [1]. However, the news that China was jumping into the ring with BHP to take a stake in mining giant Rio Tinto came as a surprise to many (but not to all – see here [2]). China seems to have gained a taste for international M&A, and its increasingly sophisticated and strategic approach is impressive. As CNN Money reports:

A China Business Services source with knowledge of the deal noted that it was brilliantly implemented, with support from the very top of government, in absolute secrecy, and that it was timed to ensure maximum disruption to BHP’s bid. It has also left option the option to mount a full bid, with backing of US$120 biilion from the state, as Reuters reports:

Clearly China is getting more savvy at playing the ODI game. It even had the foresight to include a US investor. Business Spectator explains the US connection:

In addition to the Rio Tinto investment, it was recentlly announced that mining major, Anglo American, has entered a tie-up with China – in the form of China Development Bank – in Africa. AFP reports:

Another deal on the cards involves the major Australian iron ore mining company Fortesque:

The point made above about financial diversification is an interesting one, but it may tell only half the story. Big investments at the top end of the banking and financial services sector – where advice is given and big deals are made – combined with ever-increasing interests in resources could boost China’s indirect influence along with its direct control.

China has indeed staked a claim, and it could prove to be a rich seam.

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