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Problems in China’s Outbound Investment in the Mining Industry

According to a Xinhua report, over the past five years, over 95 percent of the overseas mergers and acquisitions made by Chinese companies in the mining industry ended in failure.

A major problem is that most individual Chinese companies lack an in-depth understanding of the political, economic, legal, and cultural differences in the host countries. Another issue is the proportion of stock ownership on the Chinese side. A higher Chinese ownership simplifies the decision making process and streamlines the operations. However, it invites opposition from the host countries and may even result in a lower market valuation. Chinese companies have also complained about fraudulent mining data and exaggerated mining exploration statistics.

In 2013, China topped the world in both production and consumption of iron ore, crude steel, steel, and non-ferrous metals. Chinese outbound investment in the mining sector jumped from US$4.2 billion in 2007 to 20.2 billion in 2013.

Source: Xinhua, June 1, 2014