It is reported that the Chinese Government would act to protect its steel manufacturers against the adverse effects of iron ore pricing power if a merger between BHP Billiton and Rio Tinto merger went ahead.

Ms Susan Ning, a partner of Chinese law firm King & Wood, said that “The Chinese Government would extend its influence, one way or another, given the potential effect of a merger on iron ore prices paid by Chinese steel manufacturers.”

She said "If they used that ground, I would not be surprised. This is regarding national security, given that China is probably the biggest consumer of iron ore.”

But Ms Ning said existing Chinese merger and acquisition laws including the introduction of anti-monopoly legislation due to be passed next year gave the Government very little ability to do anything concrete about pricing power issues arising from the merger. She also said that it remained unknown exactly how the Chinese Government would exert its influence, raising the possibility of strategic investments by government owned corporations as one possibility.