Chinalco bides time on Rio stake

CHINA Inc is unlikely to assist Rio Tinto with a major cash injection any time soon, despite what Chinese officials say is a top-level Government directive for state-owned companies to go out and buy international resources assets at current discount prices.

Rio Tinto announced last night it will slash 14,000 jobs, cut $US5 billion ($7.6 billion) in capital spending next year and accelerate asset sales to repay $US10 billion of debt by the end of 2009 as the global financial crisis curbs demand for metals.

But executives from a major Chinese company arrived in Australia this week with "a surprisingly long shopping list" in hand, according to a source close to the company.

An official delegation has been dispatched to South Africa to examine opportunities for bargains, according to a member of the delegation.

Chinalco, the Chinese aluminium giant, is thought to be the only obvious Chinese candidate for pursuing a big new strategic stake in Rio Tinto because of its existing stake in the company and a Chinese Government preference for not letting Chinese companies compete against each other for foreign assets.

Chinalco enjoys particularly strong ties to the central leadership. The company's president, Xiao Yaqing, is an alternative member of the Communist Party's Central Committee.

The company is considering raising its stake in Rio Tinto to nearly 15 per cent.

But sources close to both companies say there have been no recent direct discussions between the two concerning a larger stake.

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