A Big Australian makes its Presence felt in China

The China Daily of 18 December 09 reports about concerns that a Big Australian is too big! In its magazine China Metallurgical News, the China Iron and Steel Association (CISA) expressed  concerns about the "monopolistic" JV between BHP Billiton and Rio Tinto. CISA views the JV as detrimental to China's economic interests. Although the Australian miners stated that the JV would cover only the cost and not the sales side, CIAS remains unconvinced by the assurances offered, suggesting the relationship would reduce competition and increase the price of iron ore globally. In fact, CISA felt that "customers across the whole world should oppose it as one". The underlying concern, however, remains one of self-interest - to ensure China gets an equitable result when it negotiates its price. While China is the biggest market for each of the JV partners, the China Daily also reports that Beijing faces an up hill battle to ''gain any price concessions from Rio Tinto, BHP Billiton or Brazil's Vale''. In fact, CISA wants that the Chinese government to use its anti-monopoly legislation to kill the deal. The Chinese Daily, however, reports this strategy would be difficult because of China's untested laws in the area.

Snippits from the Business News in China

The China Daily of 18 December 09 reports that FDI has soared to its highest level in 16 months. The rationale offered for this increase is confidence by foreign investors in China's economic recovery. However, the Mandarins of China's banking regulators have cautioned banks against lending to favoured inductries. The regulators warned that ''bad loans'' could ''return to haunt Chinese banks'' in the coming period. This warning has particular implications for people who participated in the boom in FDI since mid to late 2008. Nevertheless, there is a Catch 22 here. Banks will need to continue the ''relatively rapid lending pace'' in 2010 just to keep the economy moving. A warning that should be listened to comes from Charlene Chu, Head of the China bank ratings at Fitch Ratings (Beijing) Ltd. Ms Hu implies that current and potential investors should consider risk factors and pay close attention to the the ''aggregated exposure'' of banks'. This is especially the case as ''Chinese banks tend to have pretty similar profiles and the concentration in their loan portfolio is bigger than people had realized". Ms Hu suggests correlations exist between the bouyant property development market and the under utilized and/or empty commercial office space in many Chinese cities - Caveat emptor in the current climate.