China 'naive' in bid for Rio Tinto stake

China's failure to take a key stake in Rio Tinto Ltd has been linked to that
nation's lack of experience and a propaganda campaign by BHP Billiton Ltd.

The Chinese government has chiefly blamed market forces for the failure of its
planned $US19.5 billion ($A21.24 billion) investment in Rio Tinto Ltd last year,
according to Fairfax media reports on Monday.
The deal, which would have been the Chinese government's biggest foreign investment,
collapsed in June when Rio Tinto walked away from the offer by Aluminum Corporation
of China (Chinalco).
Fairfax did not say who wrote the report but said it highlighted China's lack of
experience, talent and political acuity in investing savings.
The Chinese report said Chinalco did not sufficiently communicate with shareholders,
lacked experience in engaging lobbyists and wanted too much too fast.
It said Rio Tinto's rival, BHP Billiton, also played a part in ensuring the deal
failed.
"BHP Billiton took full advantage of its skilful mass media propaganda and its
lobbying capacity to arouse public emotions and influence the judgments of
government policy-makers," the Chinese report said, according to Fairfax.
Mine Life resources analyst Gavin Wendt told AAP he thought the Chinese government
made mistakes in their approach to Rio Tinto.
"The Chinese had this naive view and I don't think they totally understood how
Western business operates," Mr Wendt said.
"Just because you are a shareholder, even a very powerful and important one, it
doesn't mean that the company can be run by you," Mr Wendt said.
"Management has to run the company for the benefit of all shareholders, not just the
noisiest shareholder," he said.
Fairfax news reports on Monday said a report to the Chinese government listed the
rapid recovery of the world resources market as the key reason the deal fell over.
A BHP Billiton spokeswoman declined on Monday to comment on the report, as did
representatives from Chinalco and Rio Tinto.
Rio Tinto dumped the proposal from Chinalco last year amid public debate on the
growing level of Chinese ownership of Australia's natural resources and shareholder
anger over the terms of the deal.
In July 2009, soon after the deal collapsed, four Rio Tinto staff from its Shanghai
iron ore team were arrested, including Australian Stern Hu, who remains in jail
awaiting trial.
At the time, there was speculation the arrests were payback for the failure of
Chinalco's planned investment in Rio Tinto.
When the Chinalco deal fell through, Rio Tinto announced it had entered a joint
venture partnership with BHP Billiton.
Shares in Rio Tinto closed down 58 cents at $75.38, while BHP Billiton shares were
down 28 cents at $42.57.
Trade Minister Simon Crean has welcomed the Chinese government report, blaming
economic conditions.
Mr Crean on Monday told reporters the government had never viewed Stern Hu's arrest
as retaliation for the failed deal.
"I think what's important today, in terms of the report, is the affirmation, if you
like, by the Chinese government that they see them as commercially related," he told
reporters in Canberra.
"They understood, having done the analysis, understand the reason why the deal fell
over."
The next consular visit for Mr Hu would be on March 19, and a trial date had not
been set, Mr Crean said.