Chinalco stung by public wrath

THE man leading Chinalco's $US19.5 billion ($A27.4 billion) investment deal with Rio Tinto has revealed how Chinalco's acquisition strategy was influenced by sensitivity to a Chinese public backlash.

Chinalco's raid on 9 per cent of Rio Tinto in February last year led to a torrent of internet criticism from Chinese "netizens" about China squandering its wealth on loss-making foreign assets.

"The market crashed, we booked a loss, and the criticism started on the Chinese net," said Wang Wenfu, a Monash University-educated Australian citizen, who has led both of Chinalco's investment deals with Rio.

"We approached (Australia's Foreign Investment Review Board) to go to 14.99 per cent when Rio's share price began to crash ¡ª we thought maybe we should average down." But Chinalco sharply changed direction when BHP Billiton abandoned its takeover bid for Rio Tinto.

"I called Doug Ritchie (Rio's managing director of strategy) in December and asked him if the rumours going around the market of Rio conducting asset sales was true," said Mr Wang.

"He said 'yes', and we met in Hong Kong.

"Buying the assets themselves would be easier to sell to the public and shareholder than just buying more shares.

"People don't realise public opinion is so important, not the Government. When on your website there are many millions of criticisms, you start to be mindful."

The deal was shaped in December but nearly broke down several times.

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