By Bloomberg News June 3 (Bloomberg) -- Hunan Valin Iron & Steel...

By Bloomberg News
June 3 (Bloomberg) -- Hunan Valin Iron & Steel Group, the Chinese steelmaker that bought a stake in Australia’s Fortescue Metals Group Ltd., agreed to establish an investment fund with China Huarong Asset Management Corp. to seek acquisitions.
The fund will start with an initial 1 billion yuan ($146 million), which may rise to 10 billion yuan, Peng Min, a spokeswoman for Valin, said in a phone interview today from the steelmaker’s headquarters in Changsha, Hunan province. The accord was signed yesterday, Peng said.
China, which produces one-third of the world’s steel, is driving industry consolidation to boost competitiveness and raw material purchasing power. Valin Steel, China’s ninth-largest producer, this year paid A$1.3 billion ($1.1 billion) for its
17.3 percent stake in Fortescue.
“The fund will push forward domestic acquisitions, although it’s unlikely to invest through the stock market,”
said Valin’s Peng.
China set up Huarong in 1999 together with China’s other three asset management companies to clean up the balance sheets of the nation’s biggest lenders after they racked up bad debts.
Huarong holds about 12 billion yuan worth of stakes in Chinese steel companies and they may become acquisition targets for Valin, the official Xinhua News Agency reported today. Peng declined to comment.