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No foreign controlling stakes in steel firms
By Gong Zhengzheng (China Daily)
Updated: 2005-07-14 05:55

China, the world's No 1 steel manufacturer and consumer, is expected to change the rules governing foreign investment in its fast-growing steel sector.

The nation will forbid foreign steel producers from taking controlling stakes in domestic steel companies, Qi Xiangdong, deputy secretary general of China Iron and Steel Association, said yesterday.

Steel products are arranged neatly in a warehouse of an iron and steel company in Ningbo, east China's Zhejiang Province in this June 2005 photo. China says that foreign investors are not allowed to take the controlling stakes in the Chinese steel firms. [newsphoto]

Foreign steel producers, if they want to invest in China's steel sector, must "have independent intellectual property in steel-making technologies and have an annual output of 10 million tons," Qi told China Daily.

These restrictions will be included in a national steel industry policy, which is to be released next week, he said.

They come as foreign steel giants are speeding up mergers and acquisitions (M&As) in China's steel industry, and even seeking majority stakes in domestic steel mills.

Mittal, the world's biggest steel group, will buy a 36.67 per cent stake in Valin Iron and Steel Co Ltd - a Shanghai-listed steel maker in Central China's Hunan Province, the Chinese company said last month.

The figure will be less than it previously intended.

In January, Mittal and Valin's State-owned parent agreed to each having a 37.17 per cent stake in the Shanghai-listed firm.

Arcelor, the world's No 2 steel company, has also been seeking a controlling stake in Laiwu Iron and Steel Co Ltd - a Shanghai-listed steel maker in East China's Shandong Province.

Both Valin and Laiwu are among China's top 20 steel makers.

Analysts said the expected steel policy indicates that the Chinese Government is unwilling to see foreign steel giants control the steel sector.

"The steel sector is one of backbones of China's steadily-growing economy. Therefore, it should not be controlled by foreigners ," said Tian Shuhua from China Galaxy Securities Co Ltd.

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