HONG KONG: Emboldened by recent success and backed by Beijings deep pockets, an increasingly sophisticated China Inc. is poised to make bigger overseas acquisitions in its quest to secure natural resources, technology and prestige.

The acquisition by Aluminum Corp. of China, along with Alcoa, of a 12 percent stake in Rio Tinto, the largest foreign investment ever by China, was financed by a state-owned bank and underscored the countrys ambition and financial power.

Analysts said the purchase affirmed Chinas ability not only to identify deals but also complete them, something mainland Chinese companies have not always managed to achieve. And settling for a minority stake showed a recognition of political realities abroad and management limitations at home.

“The government has for several years had a policy called the go out policy, in which Chinese companies are encouraged to do outbound” mergers and acquisitions, said Philip Partnow, managing director at UBS Securities in Beijing. “Until now, its been more talk than action. Now, youre finally starting to see real signs of activity.”

Outbound deals from China last year nearly doubled, to $29.5 billion, according to Thomson Financial. The biggest was the $5.6 billion investment by Industrial and Commercial Bank of China in Standard Bank, a lender in South Africa.

“Chinese companies, after a number of years of strong performance, have a lot of capital they can employ, and I think they have also become more skilled deal makers,” said Jonathan Zhu, a managing director at the U.S. buyout firm Bain Capital.

The rising prowess in making deals by China stems from surging economic clout, increasing financial savvy, and hard lessons of the past.

Beijing has long been keen to buy abroad. But until last year, its most noteworthy effort in this area was its $18.5 billion bid in 2005 for Unocal, the U.S. oil producer. The Chinese were was thwarted by political opposition.

Other failed deals include a bid by the parent of China Mobile for Millicom International Cellular. More recently, Nufarm of Australia ended talks for a $2.7 billion sale to a group including China National Chemical after the buyers were unable to make a formal offer.

“You try a few times, accumulate the experience so that you succeed the next time around,” Zhu said. “I think it really is a confluence of events that has led to more recent successes.”

The Rio Tinto stake, of which $12.8 billion was financed by China Development Bank and $1.2 billion by Alcoa, is the latest to highlight the financial resources at Beijings disposal. In another deal, a government fund in December invested $5 billion in Morgan Stanley

“Theres an increased sophistication and awareness in terms of how to approach and execute on complicated cross-border transactions,” said Colin Banfield, head of mergers and acquisitions in Asia excluding Japan at Lehman Brothers, which represented Aluminum Corp. of China, or Chinalco, in its purchase of the Rio Tinto stake.

While the biggest Chinese companies are state-run, analysts say Beijing tends to exercise its influence by setting strategic goals rather than picking acquisition targets. The companies have autonomy but need government approval before making a deal.

But Chinese officials remain capable of the occasional clumsy maneuver.

Ping An Insurance, which last year invested $2.7 billion in the Dutch-Belgian financial company Fortis, drew a rare rebuke Monday from The Peoples Daily over a planned $22 billion share sale that contributed to a fall on the stock market. Ping An is believed to be building up its cash reserves to make a big investment in a European company like Prudential

And the timing is not always ideal: Its $200 billion sovereign wealth fund, China Investment Corp., paid $3 billion for a stake in Blackstone Group ahead of the U.S. private equity firms initial public offering last year. Since then, Blackstone shares have fallen 39 percent.

A key to the recent success of Chinese mergers and acquisitions has been restraint: The biggest deals have been for minority stakes, which are more palatable to overseas investors and easier for management to swallow.

“Its perceived to be safer to go in and buy only a part of the company rather than to try to buy the whole thing,” Partnow said. “Chinese companies are concerned about the added execution risk of integrating and managing a large foreign acquisition.”

The Rio Tinto deal stokes the confidence of Chinese officials after they lost courage after the failed bid for Unocal, said Na Liu, a strategist at Scotia Capital.

“With this initial success,” she said, “we would not be surprised to see some Chinese state-owned enterprises begin to take a significant stake in Canadian, Australian, and American coal and oil and gas companies, without attempting an outright takeover.,”

HONG KONG: Emboldened by recent success and backed by Beijings deep pockets, an increasingly sophisticated China Inc. is poised to make bigger overseas acquisitions in its quest to secure natural resources, technology and prestige.

The acquisition by Aluminum Corp. of China, along with Alcoa, of a 12 percent stake in Rio Tinto, the largest foreign investment ever by China, was financed by a state-owned bank and underscored the countrys ambition and financial power.

Analysts said the purchase affirmed Chinas ability not only to identify deals but also complete them, something mainland Chinese companies have not always managed to achieve. And settling for a minority stake showed a recognition of political realities abroad and management limitations at home.

“The government has for several years had a policy called the go out policy, in which Chinese companies are encouraged to do outbound” mergers and acquisitions, said Philip Partnow, managing director at UBS Securities in Beijing. “Until now, its been more talk than action. Now, youre finally starting to see real signs of activity.”

Outbound deals from China last year nearly doubled, to $29.5 billion, according to Thomson Financial. The biggest was the $5.6 billion investment by Industrial and Commercial Bank of China in Standard Bank, a lender in South Africa.

“Chinese companies, after a number of years of strong performance, have a lot of capital they can employ, and I think they have also become more skilled deal makers,” said Jonathan Zhu, a managing director at the U.S. buyout firm Bain Capital.

The rising prowess in making deals by China stems from surging economic clout, increasing financial savvy, and hard lessons of the past.

Beijing has long been keen to buy abroad. But until last year, its most noteworthy effort in this area was its $18.5 billion bid in 2005 for Unocal, the U.S. oil producer. The Chinese were was thwarted by political opposition.

Other failed deals include a bid by the parent of China Mobile for Millicom International Cellular. More recently, Nufarm of Australia ended talks for a $2.7 billion sale to a group including China National Chemical after the buyers were unable to make a formal offer.

“You try a few times, accumulate the experience so that you succeed the next time around,” Zhu said. “I think it really is a confluence of events that has led to more recent successes.”

The Rio Tinto stake, of which $12.8 billion was financed by China Development Bank and $1.2 billion by Alcoa, is the latest to highlight the financial resources at Beijings disposal. In another deal, a government fund in December invested $5 billion in Morgan Stanley

“Theres an increased sophistication and awareness in terms of how to approach and execute on complicated cross-border transactions,” said Colin Banfield, head of mergers and acquisitions in Asia excluding Japan at Lehman Brothers, which represented Aluminum Corp. of China, or Chinalco, in its purchase of the Rio Tinto stake.

While the biggest Chinese companies are state-run, analysts say Beijing tends to exercise its influence by setting strategic goals rather than picking acquisition targets. The companies have autonomy but need government approval before making a deal.

But Chinese officials remain capable of the occasional clumsy maneuver.

Ping An Insurance, which last year invested $2.7 billion in the Dutch-Belgian financial company Fortis, drew a rare rebuke Monday from The Peoples Daily over a planned $22 billion share sale that contributed to a fall on the stock market. Ping An is believed to be building up its cash reserves to make a big investment in a European company like Prudential

And the timing is not always ideal: Its $200 billion sovereign wealth fund, China Investment Corp., paid $3 billion for a stake in Blackstone Group ahead of the U.S. private equity firms initial public offering last year. Since then, Blackstone shares have fallen 39 percent.

A key to the recent success of Chinese mergers and acquisitions has been restraint: The biggest deals have been for minority stakes, which are more palatable to overseas investors and easier for management to swallow.

“Its perceived to be safer to go in and buy only a part of the company rather than to try to buy the whole thing,” Partnow said. “Chinese companies are concerned about the added execution risk of integrating and managing a large foreign acquisition.”

The Rio Tinto deal stokes the confidence of Chinese officials after they lost courage after the failed bid for Unocal, said Na Liu, a strategist at Scotia Capital.

“With this initial success,” she said, “we would not be surprised to see some Chinese state-owned enterprises begin to take a significant stake in Canadian, Australian, and American coal and oil and gas companies, without attempting an outright takeover.,”

HONG KONG: Emboldened by recent success and backed by Beijings deep pockets, an increasingly sophisticated China Inc. is poised to make bigger overseas acquisitions in its quest to secure natural resources, technology and prestige.

The acquisition by Aluminum Corp. of China, along with Alcoa, of a 12 percent stake in Rio Tinto, the largest foreign investment ever by China, was financed by a state-owned bank and underscored the countrys ambition and financial power.

Analysts said the purchase affirmed Chinas ability not only to identify deals but also complete them, something mainland Chinese companies have not always managed to achieve. And settling for a minority stake showed a recognition of political realities abroad and management limitations at home.

“The government has for several years had a policy called the go out policy, in which Chinese companies are encouraged to do outbound” mergers and acquisitions, said Philip Partnow, managing director at UBS Securities in Beijing. “Until now, its been more talk than action. Now, youre finally starting to see real signs of activity.”

Outbound deals from China last year nearly doubled, to $29.5 billion, according to Thomson Financial. The biggest was the $5.6 billion investment by Industrial and Commercial Bank of China in Standard Bank, a lender in South Africa.

“Chinese companies, after a number of years of strong performance, have a lot of capital they can employ, and I think they have also become more skilled deal makers,” said Jonathan Zhu, a managing director at the U.S. buyout firm Bain Capital.

The rising prowess in making deals by China stems from surging economic clout, increasing financial savvy, and hard lessons of the past.

Beijing has long been keen to buy abroad. But until last year, its most noteworthy effort in this area was its $18.5 billion bid in 2005 for Unocal, the U.S. oil producer. The Chinese were was thwarted by political opposition.

Other failed deals include a bid by the parent of China Mobile for Millicom International Cellular. More recently, Nufarm of Australia ended talks for a $2.7 billion sale to a group including China National Chemical after the buyers were unable to make a formal offer.

“You try a few times, accumulate the experience so that you succeed the next time around,” Zhu said. “I think it really is a confluence of events that has led to more recent successes.”

The Rio Tinto stake, of which $12.8 billion was financed by China Development Bank and $1.2 billion by Alcoa, is the latest to highlight the financial resources at Beijings disposal. In another deal, a government fund in December invested $5 billion in Morgan Stanley

“Theres an increased sophistication and awareness in terms of how to approach and execute on complicated cross-border transactions,” said Colin Banfield, head of mergers and acquisitions in Asia excluding Japan at Lehman Brothers, which represented Aluminum Corp. of China, or Chinalco, in its purchase of the Rio Tinto stake.

While the biggest Chinese companies are state-run, analysts say Beijing tends to exercise its influence by setting strategic goals rather than picking acquisition targets. The companies have autonomy but need government approval before making a deal.

But Chinese officials remain capable of the occasional clumsy maneuver.

Ping An Insurance, which last year invested $2.7 billion in the Dutch-Belgian financial company Fortis, drew a rare rebuke Monday from The Peoples Daily over a planned $22 billion share sale that contributed to a fall on the stock market. Ping An is believed to be building up its cash reserves to make a big investment in a European company like Prudential

And the timing is not always ideal: Its $200 billion sovereign wealth fund, China Investment Corp., paid $3 billion for a stake in Blackstone Group ahead of the U.S. private equity firms initial public offering last year. Since then, Blackstone shares have fallen 39 percent.

A key to the recent success of Chinese mergers and acquisitions has been restraint: The biggest deals have been for minority stakes, which are more palatable to overseas investors and easier for management to swallow.

“Its perceived to be safer to go in and buy only a part of the company rather than to try to buy the whole thing,” Partnow said. “Chinese companies are concerned about the added execution risk of integrating and managing a large foreign acquisition.”

The Rio Tinto deal stokes the confidence of Chinese officials after they lost courage after the failed bid for Unocal, said Na Liu, a strategist at Scotia Capital.

“With this initial success,” she said, “we would not be surprised to see some Chinese state-owned enterprises begin to take a significant stake in Canadian, Australian, and American coal and oil and gas companies, without attempting an outright takeover.,”