Chinese companies looking for overseas mining assets could benefit from the US credit crunch and the rising yuan, while before going global, unseasoned firms still have to do more to succeed as challenges intensify.
Spurred by a commodity price boom, mergers and acquisitions in global mining industry have been active with the participation of the world's largest mining companies and sovereign wealth funds.
But in another aspect, traditional resource-rich countries such as Australia, Canada, Brazil and Russia are becoming increasingly unwilling to sell as they themselves become wealthier due to protectionism.
Chinese firms, which have the blessing from the government to feed domestic demand with overseas resources expansion, have the opportunity to accelerate their outbound paces, said Vice Commerce Minister Fu Ziying during a recent forum.
According to accountancy and financial advisory firm Deloitte, a total of 66 overseas mining M&A deals were handled by Chinese companies in 2007 involving US$4 billion. And in the first quarter of this year, 16 outbound M&As worth US$903 million were accomplished.
Fu said the subprime mortgage which has tightened liquidation in US financial market, and the appreciation of the Chinese currency, could strengthen Chinese firms' muscle in their overseas M&A efforts.
Investments made by the Chinese mainland companies abroad rose to US$19.3 billion in the first quarter this year, exceeding the total for last year, according to media reports quoting Vice Commerce Minister Chen Jian.
"This underscores the strong enthusiasm in the outbound drive - but I have to pour some cold water on it," said Ronald Chao, a corporate finance partner at Deloitte.
"Chinese companies still have to do more homework before going global to familiarize themselves with local business and regulation environment as well as other customs and manners in foreign markets," according to Chao.
