Business版 - "Long March" on the road of state capitalism. |
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发帖数: 602 | 1 The language of matrimony may often be invoked to describe corporate tie-ups
;
bust-ups too. But Rio Tinto's broken engagement with Chinalco of China
prompted
one of Beijing's more strident state-controlled newspapers to run an
editorial
last weekend that, in accusing the Anglo-Australian resources group of
infidelity,
made an elaborate contribution to the genre.
“Poor Chinalco prepared the wedding clothes but when the peach was ripe
somebody
else plucked it,” the Beijing Times opined. “Rio Tinto is just like an
unfaithful woman: once she loved the money in Chinalco's pocket but she
actually
didn't love the man himself. Now she is breaking faith and kicking down the
ladder.”
Rio's decision to reject a $19.5bn (￡11.9bn, 3.9bn) investment package
from the
Chinese mining giant is being seen by senior leaders in Beijing as a blow to
Chinese prestige. It triggers painful memories of a similar debacle in 2005,
when
political opposition in Washington blocked China National Offshore Oil Corp'
s
$18.5bn attempt to acquire Unocal, the US energy company.
Xiong Weiping, Chinalco's chairman, yesterday laid the blame squarely on Rio
Tinto
for the collapse of a deal originally agreed four months ago. “We are very
disappointed with the decision of the Rio Tinto board to withdraw their
recommendation for this transaction but this result was completely out of
our
control,” he said in Beijing.
The Rio deal would have been China's largest offshore investment by far and
was to
have given Chinalco a boardroom presence at one of the world's top three
producers
of iron ore – a commodity essential to development in China. Its failure
raises
the question of how long it will be before Chinese companies, many of whom
are the
world's largest in their sectors, can complete globally significant mergers
and
acquisitions.
The issue also has a resonance well beyond the corporate world. Apart from
access
to resources, another reason Beijing has been trying to cultivate state-
controlled
“national champions” is that, in acquiring international competitors, they
would
be recycling some of the country's nearly $2,000bn in foreign exchange
reserves,
the world's largest.
Chinese offshore investment has indeed surged: from just $143m in 2002,
outbound
non-financial direct investment reached $40.7bn last year. But the
collection of
smaller purchases that this reflects – including a handful on Wall Street
just
before the credit crisis hit – are mostly considered lossmaking failures.
In an
ultra-cautious corporate culture, where government-appointed managers have
much to
lose from failed deals, that woeful record provides a powerful deterrent.
Just as
significant, however, are the misgivings in many parts of the world about
selling
prized assets to a secretive, autocratic government which many see as a
potential
future adversary.
Mr Xiong refused to blame the failure of the deal on the government in
Australia,
where most of Rio Tinto's mining operations are. It was thought that
Canberra
would approve the deal in principle but with conditions attached that would
allow
the authorities to look as if they were preserving Australian interests. “
The
Australians are protecting their natural resources, it is that simple,”
says one
person familiar with the thinking of Chinese leaders. “Compared to America
they
are much smaller and far more reliant on China as a customer for their
minerals,
so they found an indirect way to block the deal instead of just coming out
and
rejecting it like the US did with CNOOC.”
Canberra's decision to extend its review period for the investment did
provide
time for public hostility to build and eventually, as commodity prices
rallied,
for Rio's rising share price to make the deal less attractive to its board.
Opposition focused on the fact that Chinalco, as with virtually all large
Chinese
companies, answers to the leaders of the Communist party. Barnaby Joyce,
Senate
leader of the minority National party, fronted a television advertising
campaign
stoking fears that Australia's “source of wealth” was being hijacked by a
foreign government.
Throughout its courtship of Rio Tinto, in which it still holds a 9.25 per
cent
stake, Chinalco struggled to distance itself from the “China Inc” label
and
constantly asserted that the investment was being made for solely commercial
reasons. But this argument was undermined when Xiao Yaqing, the polished
president
of Chinalco and driving force behind the deal, was promoted to the State
Council,
China's cabinet.
Also in the middle of the Rio bid, Beijing rejected Coca-Cola's attempt to
buy a
Chinese juice-maker, in a controversial and largely unexplained anti-
monopoly
ruling. “That reinforced the perception in Australia that China was looking
for
something from us that they weren't willing to provide to the rest of the
world,”
says one person involved in the Rio deal.
As if to strengthen that impression, two other state-controlled Chinese
resources
companies announced Australian investment plans within weeks of the Chinalco
bid.
Minmetals' plan to buy Oz Minerals and Hunan Valin's offer for a stake in
Fortescue Metals could not have come at worse time for Chinalco. In its
editorial
last Saturday, the Beijing Times extended its metaphor a bit further to
criticise
the Chinese companies for all piling in at the same time: “With so many
handsome
young men pursuing [Australian mining assets], even an ugly girl could be
arrogant
and picky.”
Co-ordination might have been lacking but Beijing, which particularly
encourages
its companies to make offshore investments in the resources sector, often
frames
these investments to a domestic audience as strategic and political
objectives.
Its state energy giants have secured supplies in places such as Kazakhstan,
Africa
and Latin America, often backed by soft loans from Chinese banks.
Indeed, four state-owned banks agreed to provide Chinalco with $21.5bn at an
interest rate that was just a fraction of what any commercial bank would
have been
able to offer. That provided proof to many Australian politicians that
Chinese
state companies were motivated more by what was good for “China Inc” than
by
real commercial concerns – and undermined Chinalco's argument that it would
not
cut sweet deals for Chinese purchasers of Australian minerals.
But the Communist party influence on management that makes many in the west
suspicious of Chinese corporations' intentions also makes Chinese executives
cautious. “Especially since CNOOC was blocked by the US from buying Unocal,
the
managers of these large state companies are very afraid of even proposing
deals
because they worry they will be blocked,” says Huang Jianping, a former
government official and founder of JPI Group, an adviser to Chinese
companies
investing abroad. “These executives are political appointees and at the end
of
the day they have to consider their political careers in government, which
can be
badly damaged by a high- profile failure.”
Dealmakers who advise Chinese companies routinely complain that an
impediment to
outbound activity is risk-averse decision-making. The failure of Chinalco's
attempt to link up Rio will only exacerbate the problem, they add. Few
executives
are paid bonus incentives and even fewer are guaranteed large pay-offs in
the
event of corporate failure. So there is little upside in taking commercial
risk.
Beijing itself has also become warier. Chinese companies missed the
opportunity to
buy into a host of western groups when stock markets tumbled earlier this
year,
dealmakers say – largely because of the government's reluctance to approve
large
outbound deals following the earlier string of lossmaking acquisitions.
In late 2007, just as the subprime crisis took hold in the west, Chinese
state-
owned financial institutions began buying stakes in groups including
Barclaysof
the UK, the Belgo-Dutch Fortis, Blackstone in US private equity, Morgan
Stanley on
Wall Street itself and South Africa's Standard Bank. Each proved to be ill-
timed
as share prices subsequently plunged; Fortis collapsed and was broken up. “
Very
few of the large Chinese acquisitions abroad have been successful,” says
Zhang
Yong, director of the Centre for Internationalisation of Chinese Enterprises
, a
consultancy. “Even the ones that managed a smooth acquisition have barely
been
able to maintain the operations they bought.”
While Chinese outbound investment will continue to rise in the next few
years,
Beijing's corporate champions will struggle to execute the big deals as long
as
those companies answer first and foremost to the Communist party. Every
state-
backed Chinese company (and an increasing number of private ones) has an
opaque
“party committee” comprising card-carrying Communist officials. These
committees
have no formal legal power but are the eyes and ears for the ruling
politicians
and have the final say on most important matters.
Despite the stock market listings of China's largest banks, utilities and
telecommunications companies, the state remains the majority shareholder in
all
cases and so continues to wield huge formal influence over their corporate
strategy as well. Nonetheless, according to people involved in the Chinalco
bid
and other deals, the perception of a monolithic “China Inc” is inaccurate.
Companies do answer to the party but constant shifts in power within the
elite
mean that deals are often backed behind closed doors by powerful individuals
or
factions; these groups often rely on the success or failure of such deals to
advance their political fortunes.
This means the stakes for the executives who initiate these deals, as well
as for
their political backers, are higher than for directors in the west. This,
combined
with a lack of international experience and expertise, makes many of these
executives less inclined to stake their careers on big foreign takeovers.
At the same time, companies that do want to act need to sell the proposed
deal to
Beijing as being in line with the strategic objectives of the state and the
party
– while doing their best to convince the outside world they are making
acquisitions for purely commercial reasons.
Yesterday, Chinalco's Mr Xiong said his group was still intent on becoming a
global, diversified resources company and would continue to look for
opportunities
to invest abroad. Saying it had taken note of the “robust debate” in
Australia
over the Rio plan, he suggested Chinalco may concentrate more on greenfield
investments and on buying individual mines, because those types of deals
faced
less political opposition abroad.
In its editorial, the Beijing Times had some words of advice for companies
looking
for offshore acquisitions in the future: “Chinese enterprises should learn
a
lesson from this: those who love money are not reliable,” it warned. “
Never be
too trusting of others because in international dealings there is only one
rule:
no eternal friendship, only eternal profit.” |
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