The deal whereby Sichuan Tengzhong Heavy Industrial Machinery bought the ecological moving disaster area known as the Hummer may never happen.
Under scrutiny from Beijing and Washington, it could fall apart – even if Sichuan Tengzhong Heavy Industrial Machinery is able to raise sufficient funds.
It would be hard to imagine a deal that satisfies fewer of Beijing’s stated intentions for the future of its fractured car industry. China wants smaller, more efficient cars, and has provided tax breaks and subsidies this year that have dramatically boosted sales of greener, smaller vehicles.
Beijing also wants a more concentrated industry: but the deal would make the owner and eventual production partner of Hummer — hardly the vehicle of choice for China’s greener future — a company that does not even make cars.
The official Shanghai Securities News said the deal was likely to be blocked. "In principle, domestic car companies are not encouraged to make outbound acquisitions at the moment."
The Financial Times reported that after last week’s failure of the country’s most high-profile overseas acquisition — the plan by Chinalco to invest $19.5 billion in Anglo Australian miner Rio Tinto — the last thing Beijing wants now is another foreign embarrassment.
If Tengzhong uses its own funds to finance the transaction, Beijing may have little to say. But if the company raises funds from state-owned banks — its current plan — it must satisfy them that its course is wise. Which it is not. Not by a very long way.