A Chinese Bid for Rio Tinto?

It makes sense all the sense in the world that China, broadly defined, should make a bid for Rio Tinto. If it doesn't, there's a very good chance that the BHP-Rio merger will go through – a merger which would be unambiguously bad for Chinese iron-ore importers. Given that China's sovereign-wealth fund seems unlikely to make a bid, a strategic bid from China's private sector has to be a strong possibility.

Bloomberg's Helen Yuan says that a number of Chinese steelmakers are interested, although one in particular, Shougang, has repudiated the story. And a Reuters report saying that Baosteel might pay as much as $200 billion for Rio Tinto has been "taken with a grain of rice," according to the WSJ's Chris Kaufman.

I can't remember any Chinese company getting into a bidding war in the international M&A arena, but it's inevitable that sooner or later that will happen. And Rio Tinto is a big enough prize that it might just be the company to make such an aggressive bid worthwhile.

One big unknown: How the new left-leaning Australian government would react to such a bid. The new prime minister, Kevin Rudd, is famously fluent in Mandarin. But that doesn't make him more or less likely to object to a Chinese takeover of a large swathe of Australia's natural resources.