Stories abound of rich Chinese going to the US to buy foreclosed luxury homes on the cheap. It seems that homes aren’t the only thing Chinese are scooping up – foreign firms are in their sights, too.
Perhaps the foremost recent example is Aluminum Corp of China (Chinalco), which in February announced it was investing US$19.5 billion in Rio Tinto to help the mining giant service its debts.
Chinalco will buy US$7.2 billion in bonds that will convert to Rio shares at a future date, increasing the company’s stake in Rio from 9% to 18%. The rest of the money will come from the sale of Rio’s minority stakes to Chinalco.
It has caused a backlash among Rio shareholders in the UK and is reported to have triggered the resignation of the company’s chairman-in-waiting, Jim Leng. The cash injection is pending regulatory approval in the countries affected by the deal, including Australia and Chile.
Rio isn’t the only one on the block. AIG may replace the US government shareholder for a Chinese one – at least when it comes to its Asian life insurance unit, AIA. Bank of China (BoC) is in active discussions with Chinese officials about joining the auction process for AIG’s assets. BoC received the backing of China Investment Corp, China’s sovereign wealth fund, which chose the bank over insurer China Life.
Not everyone is rushing to buy, however. Guo Shu-qing, chairman of China Construction Bank (CCB), said the lender wouldn’t invest in overseas banks due to their questionable asset quality.
Neither is automaker Geely looking to buy. Geely denied that it was in talks with Volvo’s parent, Ford, citing declining passenger car sales in China and Geely’s limited international exposure as reasons why it had declined the offer.