China buys, Norway sells

A few months ago, Chinalco — using funds borrowed from China’s Development Bank, which itself had recently received an infusion of foreign exchange from the CIC as part of its recapitalization — bought a large stake in Rio Tinto. At the time, Richard McGregor of the FT argued:

“Chinalco’s purchase was funded by the China Development Bank, a state policy bank, a shareholder of which is the country’s sovereign wealth fund, the China Investment Corporation. The sovereign fund, further, owns the largest Chinese investment bank, which is advising Chinalco. The ambitious CDB itself is no stranger to doing the state’s business offshore. It has been given crucial government mandates, most importantly to fund the expansion of local companies in Africa, primarily for resource projects.

In short, you do not have to be a rabid conspiracy theorist to conclude that Chinalco is a front for China Inc. …. Geoffrey Cheng, of Daiwa Institute of Research in Hong Kong, told Reuters. “You’re not going against a corporation. You’re going against a nation.””*

Norway, by contrast, has decided it doesn’t want to hold Rio Tinto. (hat tip SWF Radar)

China’s quest for resources meets Norway’s socially-conscious investing.

Maybe Norway’s government fund should offer China its mining portfolio in one big block trade? Norway can avoid owning polluting mines, and China, inc could increase its resources exposure …

* McGregor’s argument is worth reading in full; he also believes that the relationship between various Chinese state firms is complicated — and different firms compete as often as they coordinate.


Originally published at CFR and reproduced here with the author’s permission.