A Lesson To Learn For Chinese State-owned Enterprises Going Global:Exploring The Chinalco-Rio Tinto Gase(2008-2009)

Chinalco-Rio Tinto is a case of great significance for Chinese companies'efforts of going abroad to seek mineral resources. After being disadvantaged in international iron ore trade for years, a Chinese state-owned enterprise (SOE) Chinalco decided to take action and injected US$14.05 billion in the second largest mining company Rio Tinto in Feb. 2008, which made Australians quite astonished. Yet Australia's Foreign Investment Review Board (FIRB) still approved the proposal but imposed undertakings. In Feb.2009, Chinalco offered another US$19.5 billion to Rio and intended to have two seats in the Board, which met the largest mining giant BHP's sabotage behind the curtain. After Chinalco and Rio reached an agreement, FIRB made a suspiciously-long review extension for another 90 days. Due to the drastically-changed market in this short period, Rio withdrew from the agreement which led to Chinalco's great financial loss.This case has been influential in China-Australia relations until today, both for provoking heated discussions on the media and even between governments, and for being the largest overseas investment a Chinese company would have made by then. But the current literature has failed to put a special focus on the case itself and conduct a comprehensive and systematic analysis. This research therefore intends to explore the causes of Chinalco's failed investment proposal and its implications. The hypothesis is that the inexperience in international Merger & Acquisition, complications brought about by Chinalco's identity of being a state-owned enterprise and the rise of protectionism in Australia led to the unpleasant result. The case is also noteworthy in that it has implications for international iron ore negotiation, Australia's foreign investment policy, China-Australia relations and Chinese SOEs going global. The analysis of these obstacles Chinalco had met is very meaningful to help Chinese adventurers upgrade their strategies and become more proficient and confident in confronting the challenges in the future of "going global".