(FIRB) tightened its scrutiny of foreign investment bids, fearing that the country's national resources would fall under control of others. Sinosteel's application to raise its stake in Murchison, for instance, was delayed by the FIRB for three months. Joint venture proposals by other Chinese companies, including Shougang Group and Anshan Iron and Steel Group, were also shelved by the FIRB.

In response to the concerns, Australian Federal Treasurer Wayne Swan recently told the local press that Australia's doors are open to all foreign investments in line with its national interests, including those from China.

He said examining foreign investment proposals closely has taken time, especially with the many investment bids Australia has received from Chinese companies in recent years. According to a recent report by Xinhua News Agency, China's foreign direct investment (FDI) in Australia surpassed AU$30 billion ($29 billion) from June 2007 to June 2008, while its FDI in the previous two fiscal years amounted to around AU$10 billion ($9.6 billion) in total.

Chinese industry observers caution that once global iron ore prices drop, Sinosteel will suffer, because its mining costs in Australia are two to three times more than those of local miners such as BHP Billiton and Rio Tinto.

Recent actions by the Japanese have also added to suspicions clouding the merger. While Chinese companies jostle for overseas investments, the Japanese, despite an even higher reliance on imports, have been doing the opposite. Savvy Japanese investors in recent years have remained aloof from the iron ore buying craze of their Chinese counterparts. Japanese steelmaker Mitsui & Co. Ltd., for instance, sold its 51-percent holding in Indian iron ore miner SesaGoa Ltd. last year for $1.9 billion.

But Li Xinchuang, Deputy Director of the China Metallurgical Industrial Planning and Research Institute, is of a different mind. He told China Times that even if the global demand for steel becomes anemic, the buoyant domestic market would still be hungry for foreign steel products. Besides this, the prices of resource-based products such as steel are bound to increase in the long run on the back of booming steel industries in emerging markets, he added.

More on the way

Sinosteel President Huang Tianwen told China Times that the Midwest takeover marked a high point in his company's ongoing plans for foreign acquisitions. Sinosteel was the first Chinese concern to participate in overseas mining projects. In 1988, it collaborated with local companies to develop the Channar Iron Mine in the Pilbara region of west Australia.

"We have been committed to supporting the Australian mining industry for over 20 years no matter how good or bad the market was," Huang said.

Huang also said Sinosteel would help upgrade Midwest's infrastructure and technology. He noted that the company would be a large corporate taxpayer in the mining area and bring more employment opportunities.

Outside Australia, Sinosteel has invested in Africa, Europe and Southeast Asia, where it has set up 23 subsidiaries. According to Huang, the overseas revenue of Sinosteel is expected to account for half of its total revenue to justify its status as an international giant. Of the company's 123.5 billion yuan ($17.6 billion) revenue in 2007, about 40 percent was generated overseas, he added.