Sydney Morning Herald cited an unidentified official connected to the China Iron & Steel Association as saying that Chinese companies including Baosteel Group Corp may combine to buy a significant stake in BHP Billiton Ltd.

The newspaper said that Chinese companies including Baosteel, Wugang and Angang Steel Co may form an investment vehicle to buy the stake with funding possibly sourced through the China Development Bank, the same fund that financed Aluminum Corp of China's purchase of Rio Tinto Group shares.

The paper said any purchase of BHP shares would require approval from China's National Development & Reform Commission and the State Council.