Mainland players learn subtler ways to acquire foreign assets

Chinese firms have rarely found it easy to secure their own supplies of natural resources overseas. The most notorious rebuff occurred last year when China National Offshore Oil Corp's attempt to take over United States oil producer Unocal Corp was scuttled by political opposition in Washington.

Currently hanging in the balance is an attempt by Citic Resources, a Hong Kong-listed unit of state conglomerate Citic Group, to acquire the oil assets of a Canadian firm, Nations Energy, in Kazakhstan. The Kazakh oil and energy minister last month said he intended to block the transaction on national security grounds.

But more subtle strategies may stand a better chance of success. The decision to play peacemaker and dealmaker in a bitter dispute between two Australian mining firms looks likely to pay off in new iron ore resources for Shanghai Merchants Holdings, a Hong Kong-listed metals trader.

Shanghai Merchants helped to facilitate Mount Gibson Iron's takeover of Aztec Resources by buying minority stakes in both. And a major Shanghai Merchants shareholder, state-owned Shougang Steel, one of China's five largest steelmakers, also joined in at a decisive phase of the poker game.

'It's a smarter move for Shougang to be a catalyst behind the scenes than to acquire foreign assets directly,' said Ivan Chung, ratings managing director of Xinhua Finance. 'It will cause less political issues. When Chinese firms try to buy foreign assets, politicians may politicise the issue.'

He added: 'With a Chinese shareholder who will be a major buyer [of iron ore], the merger becomes more attractive to all sides, as there will be a guaranteed buyer.'