China announces support for non-ferrous metals industry

POLITICAL ECONOMY

Chinese firm buys stake in Australia's Fortescue Metals
Australia's Fortescue Metals confirmed Wednesday that China's Hunan Valin Iron and Steel Group had agreed to invest more than one billion dollars (650 million US) in the company. Fortescue said that Valin would end up with a 16.5 percent stake in the iron ore miner, the latest move by a state-owned Chinese firm into Australia's resources sector. Under the deal, Valin will subscribe to 225 million new Fortescue shares at 2.48 dollars per shares, making a total of 558 million dollars. It will also buy 275 million existing shares from an institutional investor, representing another 778 million dollars at Fortescue's last quoted stock price of 2.83 dollars. Fortescue chief executive Andrew Forrest said the capital injection would help his company achieve its ambition to more than double its iron ore output to 120 million tonnes a year. "Our ability to establish a long-term partnership with a key participant in China's growing steel industry is compelling," he said. Valin chairman Li Xiaowei will receive a seat on the board as part of the deal. However, Fortescue said it was mindful of sensitivities in Australia about Beijing's spending spree in the country's resources sector and had included a clause preventing Valin's shareholding from exceeding 17.5 percent. "This agreement has been carefully structured from the outset to satisfy both the requirements and intent of Australia's foreign investment regulations, while providing Fortescue with access to additional capital," Forrest said. Earlier this month, China's Minmetals offered 2.6 billion Australian dollars to take over debt-laden OZ Minerals. The proposed deal came days after China's state-owned aluminium firm Chinalco said it was putting 19.5 billion US dollars into another troubled Australian mining giant, Rio Tinto, to increase its stake to 19 percent. Before the global economic downturn, China's virtually unquenchable demand for mineral resources helped drive a decade-long boom in Australia, and China remains the vital market for Australia's resources sector. But Australian politicians have raised concerns about China's state-owned entities buying into Australia's resource sector. Fortescue holds rights to a massive 40,000 square kilometres (15,444 square miles) of Western Australia's resource-laden Pilbara -- an area larger than Taiwan. Forrest has moved to position Forestcue as the "third force" in Australian iron ore, competing with giants BHP Billiton and Rio Tinto to shuttle millions of tonnes to Asia. The company's success briefly made Forrest Australia's richest man last year but the value of his stake in Fortescue has tumbled as falling demand for iron ore has sent its share price down. The company's shares were in a trading halt Wednesday.

by Staff Writers
Beijing (AFP) Feb 25, 2009
China Wednesday issued a stimulus package for its non-ferrous metals industry as it continues to boost key sectors amid the global economic crisis.

The package, passed by the State Council, or cabinet, includes measures to adjust the rate of export tax rebates, according to a statement on the government's website.

China has so far unveiled stimulus packages for 10 industries, including the auto, steel, shipbuilding, and textile sectors, the official Xinhua news agency said.

The State Council also said the central government and local authorities would devote 100 billion yuan (14.6 billion dollars) to technology projects over the next two years, according to the statement.

China has been hit hard by the global economic crisis, and the Asian giant's growth slowed to 6.8 percent in the final quarter of last year -- sharply down from the double-digit expansion seen for most of the past decade.

This year, economic growth in China could slow to 7.5 percent, a level not seen since 1990, according to the World Bank.

The government unveiled a four-trillion-yuan (590-billion-dollar) spending programme in late 2008 to revive the economy.

earlier related report
China seeks 'powerful' response to crisis: state media
President Hu Jintao has warned of a deteriorating economic situation in China and called for more "powerful" measures to reverse the tide, state media said.

"The world economic situation is austere and complicated, the global financial crisis had yet to level out and China's economic growth is under pressure of a slow-down," Hu said, according to a report by Xinhua news agency.

In a speech to the ruling Communist Party's 25-member Politburo, Hu called for "more powerful and efficient measures to increase domestic demand, and consumer demand in particular," the report said late Tuesday.

"The government should maintain the policy of giving top priority to increasing domestic demand while stabilising external demand," he was quoted saying.

The report gave no details on any specific policy proposals.

The party has signalled recently it intends to take measures during the National People's Congress session, beginning on March 5, to cushion the blow from the slowest economic growth in nearly 20 years.

China's growth slowed to 6.8 percent in the final quarter of last year, sharply down from the double-digit expansion seen for most of the past decade.

The global financial crisis has particularly hit the nation's vital manufacturing and export sectors, leaving at least 20 million migrant workers jobless and raising government concerns of social unrest.

Hu's sombre outlook was the latest of several forecasts from China's leadership, which in November unveiled a spending package worth four trillion yuan (580 billion dollars) by the end of 2010 to combat the crisis.

Premier Wen Jiabao said this month China must take "extraordinary measures" to boost the economy beyond that package.

On Monday, the Politburo vowed to introduce a slew of measures to respond to an economic slowdown that it said would make 2009 the most difficult year in nearly a decade.

They would include increased government investment, new plans to revive industries, and an enhanced social security umbrella for China's masses, it said in a press release.

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POLITICAL ECONOMY

Asia's economic woes deepen as Obama vows to beat crisis

Hong Kong (AFP) Feb 25, 2009
Japan on Wednesday posted a record trade deficit and Hong Kong said its economy would shrink by up to three percent in 2009 as recession woes deepened across Asia.

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