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Chinese investment rejected again
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12:42, June 08, 2009

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By Li Hong, People's Daily Online

China Aluminum Corporation's proposed US$19.5 billion investment into the Australian-British mining giant Rio Tinto was nipped over the weekend on grounds shrouded in "mystery". The Tinto board killed the deal possibly because it has walked out of a financial dearth and world commodity prices are now on the rise, but the vehement opposition, seen in the "No" newspaper ads paid by Aussie political parties sitting in the sideline, smears of protectionism.

Not only the company, Chinalco, said it was deeply "disappointed", tens of millions of Chinese online writers who are keen to witness growing incorporation of Chinese economy into the global one, were clobbered. This is the second time that China's major corporate acquisition bids were shot to death, alongside the failed attempt by the China Offshore Oil Corporation to take over Unocal, the American oil company, in 2005.

Majority Western reports claim that China's overseas purchase of equities reflected its hidden ambition to claw up natural resources, but, it is natural and justifiable that a fast-developing economy, as big as China's, needs plenty of resources to back up and fire up. Chinese insiders believe that if mineral-rich Australia does not want the investment, Chinese businesses could simply turn to other regions, say South America and Africa, to invest and help local economies thrive there.

Many claim that the collapse of the deal is new evidence that China's attempts to extend its global corporate reach are often restricted by nationalistic backlashes abroad. As the world governments are now cooperating to combat the assault of an unprecedented ferocious economic crisis, the collapse of the new Chinalco-Rio partnership sounds all the more strange. It also deprives the Aussie company greater access to Chinese customers and opportunities to search for ores in China.

As it is known to many, mutual investment and trade has been proved to be a potent force for good, bringing enormous benefits to both parties. Even since Mr Deng Xiaoping kicked off the reform initiative in late 1970s, Japan has led other countries and invested hugely in China, in nearly every industrial lines here. Though relations tended to tilt up and down in the past years, mostly related to people's grievances towards Japan's WWII occupations, the bedrock for stability stands firmly as we heeds the good of Japanese investment.

Also, mutual investment and trade is what links countries all over the world in a pool of production that underpins global prosperity, reciprocating ideas and nurturing understanding and friendship.

Now, investment and trade are declining worldwide, casualty of the financial crisis. Protectionism, though seemly aiding local business by shunning others' investment and products, will only prolong this crisis. It is heartening news that top-ranking officials from the United States and China have strengthened liaison these days, and a meeting is undergone in Tokyo where officials are planning more effective measures to arrest a slowdown in two-way investment and trade.

Economists assert that drop in investment and trade will spread economic weakness afar, as watered-down investment and trade translates into a fall in business activity, and countries' GDP.

I don't get the figures as to Australia's trade volume and investment dollars from January to April, but, it will be too optimistic if the numbers do not drop, as other major economies, including the U.S., Japan and Europe, all reported precipitous slumps. The seizing up of finance, and a fall in demand for Aussie minerals from Japan, China and elsewhere, tells shrinkage of activity there, too.

Therefore, protectionism remains a serious danger to the world's collective efforts to achieve an early exit from the crisis. Trying to hold back a free flow of investment, a country could risk prolonging its own contraction.

The article represents the author's view only. It does not represent opinions of People's Daily or People's Daily Online.

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