Chinese companies to continue Australian investment

CHINESE companies will continue to target Australia's resources as the communist Government introduces policies to revitalise the country's non-ferrous metals industry.

China's state council has approved in principle a raft of policies, including investing in overseas resources, assets and companies, to encourage growth in its non-ferrous sector.

The non-ferrous sector includes metals other than iron, such as copper, aluminium, lead and zinc.

China Metals, part of China's Xinhua News Agency, has published details of "plans to Readjust and Revitalise the Non-ferrous Metal Industry'', which were approved in principle in February.

Chinese interest in Australian resources has been strong, with many state-backed companies taking stakes in projects or mining groups over the years, predominantly in iron ore.

More recently, Chinalco has proposed a $US19.5 billion ($A29.98 billion) investment in Rio Tinto,  while Minmetals Non-ferrous Metals Company Ltd (Minmetals) has launched a $2.6 billion takeover of OZ Minerals.

A slump in commodity demand and prices, coupled with a meltdown in global economic markets has combined to drive down the share prices of many resource companies, making them cheap and attractive takeover targets.

In the case of Rio Tinto and OZ Minerals, however, onerous debt obligations have forced the two groups to seek lifelines.

Other key non-ferrous policies include, a restructuring of the industry to create three to five-ferrous conglomerates; phasing out of obsolete capacity; readjustment of tax policies, and government stockpiling of commodities.

Goldman Sachs said soaring commodity prices between 2003 and 2008 were a major concern for China's policymakers, with the planned measures leaning towards ensuring security of supply and likely to suppress base metals price recoveries.

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