As on energy so on minerals, China’s hunger for natural resources is unlimited. To sustain its double digit growth rate, China needs reliable access to massive amounts of minerals from beyond its borders. China is now in the middle of finalising the mother all deals for minerals.

Last Friday, Chinalco (Aluminum Company of China) paid US$12.8 billion for a relatively small stake in one of the world’s biggest mining companies, Rio Tinto. Together with the US aluminum giant Alcoa, which chipped in another $1.2 billion, Chinalco hopes to get 12 per cent of Rio’s stocks. Together Chinalco and Alcoa want to fend off the attempt by the world’s largest mining company BHP Billiton to take over Rio, a multinational corporation with some of its major operations in Australia.

To date, this is the single largest foreign direct investment by any Chinese venture in Beijing’s so-called ‘Go-out’ policy that encourages its public enterprises to acquire stakes in critical companies abroad.

Some of Beijing’s earlier ventures, like a state-owned Chinese petroleum company’s US$ 19 billion bid for the US oil company UNOCAL in 2005 ran into political difficulties when sections of the American establishment cried foul.

This time around, the Chinese have shown greater sophistication. For one, China appears to have gotten over its earlier obsession with gaining controlling stock in foreign companies. Second, China has also figured out the value of having powerful partners. Donning the American colours of Alcoa, Chinalco has bet, will reduce the potential political resistance in Australia.

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