The examination of overseas investment project of resource class will be tightened
Source: www.cbt.com.cn Citation: www.cbt.com.cn Date: Nov.8, 2013
A consulting company president who should be busy for Chinese companies to introduce investment projects was in no hurry to show his projects in CHINA MINING Congress & Expo. Because his old big customer - resource class large Chinese state-owned enterprises - received a directive from the government: the resource class overseas investment project focuses on heavy "quality" not "quantity", and the government will tighten the approval for overseas project.
Kobus Van Der Wath, the founder and President of the Beijing Axis, said, after contacting with some heads from several large mining companies overseas departments, he found that these large enterprises were reviewing the past investment results, not anxious to begin new projects.
A source close to Chinalco said:” To introduce iron ore projects in Africa to Chinalco, but the response is not approved, because of fear, so they don’t consider a new project temporarily”, and they suggested that the past project`s investment performance could affect the approval of new project.
Kobus Van Der Wath said, this may be because China`s top policy makers had a higher request for resources overseas investment.
"Chinese companies invested in Africa, Australia and South America, over the past five to seven years, but a lot of investments were not as successful as imagine," Kobus Van Der Wath said that these projects are very conspicuous, so project quality is clear for the insider.
According to his summary, these problems mainly occurred in the three aspects: some of the projects were higher in price than the market, some can`t go into production for a long time, and some occurred problems during cooperating with the local people.
Learning experiences from mistakes is the emphasis of the second stage of. Chinese outbound direct investment.” It is the pattern of the first stage that foreigners came to China, and told the Chinese what were the projects in the past.” Kobus Van Der Wath said, with Chinese companies setting new goals and strategies, the pattern he introduced project would change accordingly.
"The government will re-examine the existing project in accordance to the indicators including financial returns, project progress, and the local reputation," Kobus Van Der Wath was expected the government would set on the first relatively perfect evaluation standard about overseas investment, rather than just focus on the balance of payments, "the government will examine the overseas investment decisions from head of state-owned enterprises. "
But Kobus Van Der Wathdo not think that the government will stop financing for the resources project. “Bank will more strictly audit when offering loans, but stop financing is not a solution to the problem. I don`t think financing structure will change."
In fact the change in China is not an exception. Mike Eddie Collett, managing partner of Ernst & Young`s global mining and metals industry, said that the large global mining companies are working to improve the capital management ability.
Jiang Daming, Minister of Land and Resources, said in the opening ceremony of CHINA MINING Congress & Expo held on November 3, although the current global mining industry is still at the depth adjustment, in the long run, the development of a new round of mining "super-cycle" continues still.
Jiang Daming said:” The international mining industry should grasp the developing trend, strengthen developing confidence, continue to strengthen basic inputs such as capital, talent, technology, try to crack the institutional and mechanisms barriers which restrict the development of the mining and actively promote economic structure optimization and industrial transformation and upgrading of mining ”
According to the latest data of Ernst & Young, China is a major buyer of global mining and metals assets. The value accounts for 8% of the total amount of transactions in the first nine months of 2013 years. But if the match with China resources external dependency, there are less than 8%. take iron ore as an example, according to Chinese mineral resources report (2013) made by the Ministry of Land and Resources, the imported iron ore of China reached 744 million tons in 2012, which increased by 8.4% year on year. The external dependency was 58.7%.(Shijie)（translated by TLRHVC）
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