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December 04, 2008


China to tightens grip on foreign investment in mining sector

Catalogue for the Guidance on Foreign Investments Industries, released by National Development & Reform Commission and Ministry of Commerce, is to take effect as of December 1st 2007, under which wholly foreign owned enterprises are no longer encouraged.

The amended catalogue has prohibited exploitation of non ferrous metals like tungsten, molybdenum and tin etc and also eliminated foreign investment in exploitation of coal, copper ores, plumbum ores from Catalogue of Encouraged Foreign Investment Industries.

Mr Xiaojiong GM of trading unit of Asia Pacific Resources International Holdings Limited, fears that foreign investment in China mining sector may become more and more difficult.

In contrast, Mr Jiao Yushu senior advisor of Metallurgical Mines Association of China pointed out that the new catalogue has divided mineral resources into different categories and adopt different policies either encourages restriction or prohibition. The authority no longer encourages foreign investment in certain critical mineral resources.

Mr Zhangyong director of policy research department of China National Coal Association said that "There is an obvious line between restriction and prohibition. He said that take coal for example, the catalogue has only restricted prospecting and exploitation of special and rare coal and highlighted Chinese investors hold the controlling stake. The amendment has been misread by some as an all around restriction for foreign investment in coal industry.

Sources of Asian American Coal Inc China's first foreign coal exploitation company disclosed that "We may make some adjustment according to the government regulation. It has obtained the first joint coal exploitation license together with its Chinese partner from Shanxi government this July 2007.”

Mr Ke Ziyi CEO of its mainland unit said that the company may shift its focus to down stream coal products given the policy uncertainty regarding foreign investment in coal mining.