Caution urged for Chinese state-owned enterprises in foreign M&A

HANGZHOU, China (MarketWatch) -- China's state-owned enterprises should adopt a cautious stance in overseas mergers and acquisitions to prevent wrong decision-making in strategic purchases in the future, said a senior government official at a financial conference Saturday.

Around 150 state-owned enterprises have sought merger-and-acquisition opportunities at home and abroad in the first half of the year, and ""my advice (to them in the future) would be - be cautious - as the ultimate goal for any overseas merger and acquisition is to improve the company's competitiveness,"" said Li Rongrong, chairman of the State-owned Assets Supervision and Administration Commission, on the sidelines of the conference.

""Without (the possibility of) achieving that, anything would be uncalled for,"" Li added.

This comes after renewed talks between Aluminum Corp. of China Ltd. also known as Chinalco, and Rio Tinto PLC on a possible bauxite and alumina deal, indicating Beijing's wary stance on overseas merger and acquisition especially after the collapse of Chinalco-Rio deal.

Rio Tinto abandoned a $19.5 billion alliance with Chinalco earlier this year, turning instead to a sizable equity raising to ease debt burden.

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