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Decision Making in Chinese SOEs and the Implications for the Resource Sector

04 June 2012

Level 2, Bourke Room, RACV Club, 501 Bourke Street, Melbourne, VIC 3000

When China launched its “Go Out” policy in 1999, leaders hoped state-owned enterprises (SOEs) would snap up valuable foreign assets and transform themselves into successful multinationals. In the mining sector, China’s national champions have become powerful international investors, but they have also wasted billions of dollars on ill-conceived projects, often exacerbated by poor management. It is hard to pinpoint any Chinese foreign mining projects that are trouble free and profitable. Yet China’s resource companies have an enviable record at home, where projects are invariably completed well ahead of schedule and below the cost of comparable developments elsewhere.

The presentation will discuss the processes and techniques used by State Owned Enterprises (SOEs) to evaluate foreign mineral resource investments. The parts of the bureaucracy responsible for approving foreign investments will be identified as will the criteria they use to assess individual projects. Comments will be made on the effectiveness of the process given that SOE leadership are both commercial actors and political officials. It is this political dimension which differentiates Chinese managers from their foreign counterparts.The presentation will show that as project evaluation has improved, evaluation studies have taken on a more commercial orientation and this increased analytical rigor is fostering greater investment discipline.
Michael Komesaroff is the principal of Urandaline, which provides services to many of the world’s largest mining companies as well as investment banks and government agencies. He advises on the political economy of the global mining and metals industries in US, Australian and Hong Kong Universities. Michael has over 30 years’ experience in Asia’s mineral industries of which nearly 20 years was with Rio Tinto. To read more about Michael, please click