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Rio deal's collapse 'won't hurt relations'

THE collapse of a deal that would have seen Chinalco invest in miner Rio Tinto will not hurt relations between China and Australia, the Ministry of Commerce said. However, the ministry said there is cause for concern about a proposed merger between Rio and its rival BHP Billiton.

Rio earlier this month abandoned a US$19.5 billion deal with Chinalco, as the Aluminum Corp of China is known, in favor of joining forces with BHP, after an improvement in both mining and capital markets.

Ministry spokesman Yao Jian yesterday said the collapse of the deal was due to commercial factors and would not affect Australia's economic ties with China. The lone case also won't influence China's policy toward foreign investment, he said.

Chinalco made its offer in February to help debt-laden Rio ride out the economic slump. Xinhua news agency last week slammed Rio's move, saying the "perfidy of Rio seems somewhere between short-sightedness and possible political prejudice."

Yao said worries from China's steel sector about the Rio-BHP venture are understandable and didn't rule out the possibility of an anti-trust probe.

"(The deal) will definitely affect global iron ore supply, so it's a concern," he said. China's steel group, along with steel firms in Japan and Europe, have opposed the deal saying it would limit competition.

Under China's anti-°?monopoly law, China can pursue anti-trust complaints about deals outside China that are seen to restrict competition within the domestic market to a "certain level." The ministry hasn't yet received any request for an investigation, Yao said.

The European Union blocked BHP's previous takeover bid for Rio last year.

Meanwhile, Yao said Sichuan Tengzhong Heavy Industrial Machinery Co's bid for General Motors Corp's Hummer brand represents a normal move to invest abroad, taking advantage of the financial crisis. But, he added, Chinese firms should learn more about international rules and make prudent investments as they lack related experience and managerial skills.

Yao said the ministry, which must approve overseas investments of more than US$100 million, hadn't received an application from Tengzhong. Hummer is worth an estimated US$500 million.


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