Yang said Chinese companies that want to "bottom fish" in overseas markets face the same problems as Chery with its planned purchase of Volvo.

Natural resource companies

In the meantime, the Chinese Government is encouraging natural resource companies to make more overseas acquisitions. As for companies in other industries, the government has not shown clear encouragement for or objections to such activities, considering them a kind of market activity. In the end, companies will decide on their own whether to buy foreign assets.

The State-owned Assets Supervision and Administration Commission (SASAC) of the State Council said a short time ago that in the next three years, the state will encourage companies to develop and acquire natural resources in foreign countries and offer financial support policies for significant projects that invest in them. Meanwhile, the government is considering using a certain portion of its foreign exchange reserves to establish a special fund for overseas energy prospecting and development and provide support for oil companies to obtain overseas resources. The SASAC has selected 10 companies and will encourage them to acquire overseas enterprises with key varieties of minerals.

The revitalization plan for the iron and steel industry approved by the State Council in February encourages iron and steel companies to "go global," increase their market access to foreign resource companies, and support qualified key enterprises to carry out resource prospecting, exploitation, technology cooperation and overseas acquisitions.

"Recently, prices of resource products on the overseas market have plummeted, and some people suggest grabbing the opportunity to allow the exploitation of overseas resources by state-owned enterprises. I have no objection to this," said Wang Xiaoqi, Director of the Bureau of Planning and Development of the SASAC, at a seminar on resource strategies last December in Beijing.

There are three ways for Chinese companies to acquire foreign resources: independent operations, including prospecting and exploitation activities; purchasing shares of existing mineral companies and obtaining exploitation rights; and purchasing shares of foreign mineral companies but not holding controlling rights.

"Among the three ways, we prefer the first two," Wang said.

When buying overseas assets, natural resource companies abroad tend to focus on rights to exploit minerals and the scale of resources to be obtained, instead of merely acquiring large foreign resource companies and becoming strategic investors, Wang said. In this regard, China can learn from Japan's experiences, he added. Japanese companies not only have invested in enterprises to hedge against the risk of price fluctuations and ensure investment returns, but also have established long-term contracts to protect themselves from price fluctuations and control risks.

In the meantime, Chinese natural resource companies have had some success with overseas purchases. China Minmetals Corp., the country's largest metal trader, announced on February 16 that it had reached an agreement with OZ Minerals Ltd. of Australia to purchase the latter for about $1.7 billion. On February 12, Aluminum Corp. of China also announced it would invest $19.5 billion in the Australian mining giant Rio Tinto Plc by setting up joint ventures and purchasing convertible bonds.