China Says Australia Ties OK Despite Rio Failure

Beijing said Rio Tinto's decision to scuttle a $19.5 billion deal with Chinalco would not influence treatment of foreign investments in China.

BEIJING (AP) -- Miner Rio Tinto Group PLC's decision to opt for a tie-up with rival BHP Billiton Ltd. instead of a $19.5 billion deal with Aluminum Corp. of China will not harm wider ties with Australia, a Commerce Ministry spokesman said Monday.

But ministry spokesman Yao Jian did not rule out the possibility of anti-monopoly complaints against Rio and BHP Billiton's proposed venture.

"This single case won't affect China-Australian economic and trade cooperation," Yao said in a routine monthly news briefing. "The trading ties of the two countries are good in general," he said, noting that China is Australia's second biggest trading partner.

Yao said Rio Tinto's decision to scuttle the deal with Chinalco would not influence Beijing's treatment of foreign investments in China.

"This case won't have any negative impact on foreign companies investing in China," he said. "There will be no reason for us to take inappropriate actions."

But, given the combined large share of iron ore supplies held by Rio Tinto and BHP Billiton, and China's heavy dependence on imports, Chinese companies have good reason to pay close attention to the situation, Yao said.

State-owned Aluminum Corp. of China, or Chinalco, expressed disappointment over losing out to BHP Billiton, and Chinese steel makers have revived objections that the tie-up might give the mining giants excessive influence over iron-ore pricing.

Last week, China's steel industry group said it opposes the proposed venture as a monopolistic move.

Under a new law that took effect Aug. 1, China can pursue anti-monopoly complaints against companies outside China if their dealings are seen to restrict competition in its domestic market.

The collapse of Chinalco's deal with Rio Tinto has prompted commentary in China's state-run media suggesting Beijing might adopt such a strategy.

China would investigate if it received any complaints under the law, but it has not received any such applications yet, Yao said.

He said Chinese companies would persist in seeking strategic overseas investments, despite running into occasional obstacles.

"Now is a good opportunity for Chinese companies to 'go out' given our growing economy and foreign reserves and the decline in prices for some companies," Yao said.

"But Chinese companies do lack global experience, both in terms of corporate culture and global management practices, so they will face some difficulties and problems," he said.

Associated Press researcher Bonnie Cao contributed to this report.

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