Chinese investments in energy and materials to soar

Chinese outbound investments are likely to soar, given the particularly strong Chinese appetite in the natural resources and energy sector.

Paul Chow, a partner at Linklaters specialising in M&A who advised Rio Tinto on the unsolicited acquisition by the aluminium consortium (Chinalco and Alcoa), told ALB that China¡¯s outbound investment will ¡°accelerate¡±.

China¡¯s Cross Border Outbound acquisitions rose to US$45.2bn so far this year from 129 deals, compared to just $7.6bn from 111 deals for the same period in 2007.

The top deal was Aluminium Corporation of China (Chinalco) and US aluminium producer Alcoa¡¯s acquisition of a 12% stake in Rio Tinto for US$14.2bn in February (2008). The materials industry registered a high growth as the values of Chinese Cross Border Outbound acquisitions in this sector had a rank value of US$15.9bn from 27 deals so far compared to US$1.23bn from 29 deals in the same period last year.

The energy and power industry also saw high growth in both the value and number of deals cut in Chinese outbound acquisitions.

Seung, who has recently published a book examining the issues arising from M&A transactions in China, noted that examples of PRC outbound investments in the natural resources sector include investments in Chile (copper), Peru (zinc), Kazakhstan (oil) and Australia (bauxite, iron ore and uranium).

Chinese companies that take the long view and secure the sources of natural resources to sustain the country¡¯s economic growth and expand its international distribution networks also thrive with the support of the Chinese government.

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