china inc

China Inc and what not to doArticle from: Font size: Decrease Increase Email article: Email Print article: Print Terry McCrann

July 09, 2009 12:00am
THE 'Shanghai-ing' of those four Rio Tinto staff sends out two very clear messages, which go right to the very heart of Australia's future in the 21st century. China's century.

First, 'China Inc' is alive and well and a brutal reality that we fail to understand -- and deal with on a sophisticated basis -- at our peril.

All these supposedly entirely commercial and quite 'separate' arms of the state -- the aluminium company Chinalco, the iron and steel companies, and so on to the sovereign investment funds and the various state banks, thereal 'peoples banks' -- might function separately.

Indeed, they might even compete and scheme against each other. But ultimately they are part of the one whole -- indeed to use the word, the one 'collective'.

And Borg-like -- the Star Trek entity not Bjorn -- they ultimately work to and are answerable to that unified purpose.

Second, one of the arms, Chinalco, is pissed. As it is entirely entitled to be: in simple language Chinalco got 'stiffed' by Rio Tinto.

It came to Rio's help when Rio was in dire circumstances. They had a deal, purportedly in their shared best interests. And when Rio 'got a better offer', it dumped Chinalco.

Now Rio did exactly the right thing -- indeed, it simply did 'the thing' it should always have done from the start. And Chinalco would probably have been 'dumped' in any event by either Rio's shareholders or the Australian government.

That's not the point. Chinalco got stiffed by its partner. And that means China Inc got stiffed. The 'China Inc' that's going to be the dominant player in our future; and Chou Enlai-like, has a very long 'collective' memory.

It's another huge reason, by the bye, why we shouldn't let our relationship with China be mediated through Rio's far distant headquarters in London. But driven in Melbourne, Sydney and Canberra.

It's possible the 'Shanghai-ing' was entirely 'coincidental'. Possible but unlikely, as it 'coincided' with not just Chinalco being 'stiffed' but with Rio -- and BHP Billiton -- playing hardball on iron ore prices.

A combination which is sending a huge message to China. That the only way you get resources security is through ownership.

Join the dots. It doesn't make a lot of sense for China to pump its surpluses into ever bigger holdings of likely depreciating US government paper. When it wants and needs, iron ore, coal, copper and energy.

Comment: China can't continue to ignore willing suitors in favour of one's (RIO) who aren't interested. Hebei, give Charles a call please