Having spoken to some of my colleagues at Corporate Financing Week, I’ve been struck by the volume and size of resource deals emanating from China, and I think we could be on the brink of a major programme of asset acquisitions of real concern to – among others – Australia’s policymakers. During his recent visit to the UK, Chinese Premier Wen Jiabao made it clear that the State would continue to support the acquisition of natural resource assets outside mainland China and, on February 18, the chairmen of two of China’s largest steelmakers said that ‘going overseas is the government policy’.

They weren’t kidding!

In the space of just a few days, Aluminium Corp of China (Chinalco) picked up a suite of mining assets and a tranche of convertible bonds from beleaguered Australian miner Rio Tinto in exchange for a record US$19.5bn cash injection, while trading group Minmetals offered to buy the world’s No. 2 zinc miner, Australia’s Oz Minerals, for US$1.7bn. I have no doubt that 2009 will see cash-rich and state-backed Chinese giants continue to capitalise on current low valuations by picking up stakes in foreign resource firms, for despite the global financial crisis and the increasingly challenging macroeconomic conditions at home (I envisage below-consensus real GDP growth of 5.6% in 2009), Beijing remains obsessed with securing offshore supplies of commodities to fuel long-term domestic growth.

In recent years, this need to fuel the hitherto astonishing rate of urbanisation and economic growth has been a key strategic imperative for the Chinese government, driving an unprecedented wave of outbound M&A activity throughout emerging markets by state-backed companies like Petrochina, China Minmetals, Baosteel and China National Petroleum Corp.

Now, as Minmetals President Zhou Zhongshu puts it, ‘new opportunities for overseas investment and acquisitions are emerging as many international mining companies hit by the financial crisis see their market values shrinking’. Many miners (ranging from independent Canadian juniors to giants like Rio Tinto) are badly in need of capital and, in the latter case, weighed down with debt.

Most significantly, firms like Chinalco are able to rely on government loans to pursue strategic acquisitions at a time when a dearth of financing is limiting the ability of other multinationals to compete for prime assets.

Going forward, it will be interesting to see how much of this is directed at Australian firms, for while acquisitions will continue in China’s old emerging market stamping grounds, notably Brazil and Africa, the potential Australia offers is hugely exciting for Beijing – and why wouldn’t it be? Why would China want to continue investing in African resources if it can find prime assets at bargain-basement prices, but with zero political risk and a developed country’s infrastructure and skills base in Australia? Moreover, it stands to benefit hugely from the depreciation of the Aussie dollar against the yuan, which since November 2007 has lowered the price of potential targets by more than 20%.