06 September 2012

Geography Rules: Why Mongolia’s China Mining Strategy is a Mistake

Gabe Collins and Andrew Erickson, Geography Rules: Why Mongolia’s China Mining Strategy is a Mistake,” China Real Time Report (中国事实报), Wall Street Journal, 6 September 2012.

In May 2012, the Mongolian parliament passed a law requiring parliamentary approval for foreign investors to take a stake larger than 49% in enterprises in strategic sectors such as mining or for investments by state-owned enterprises. The timing of the law — passed shortly after an attempt by the China Aluminum Company (“Chalco”) to purchase a majority stake in coal producer SouthGobi Resources SGQ.T +0.49% – suggests it was specifically designed with China in mind.

And it was successful: The conditions imposed by the law created an untenable level of uncertainty and on Chalco abandoned its bid on Tuesday. …