Mining giant Rio Tinto yesterday predicted the global economy would remain difficult for two years, pinning hopes for an upturn on China, which it said may surprise markets with the strength of its recovery.
Economic growth in China is expected to slow further this year before investment starts to gain strength in the second half of the year, the Anglo-Australian firm said in its annual report, released yesterday.
Company executives also stressed the importance of a proposed US$19.5 billion deal with China’s Chinalco (中國鋁業) — Beijing’s largest ever foreign investment.
Chief executive Tom Albanese said demand for Rio’s products collapsed in the final quarter of last year as China’s economy slowed more rapidly than expected.
“However, we hope to see some recovery in China’s gross domestic product in the second half of this year,” he said.
Underlining China’s importance to Rio, Albanese said: “All projects and near-term capital expenditure will be continuously reassessed in light of demand from China, the prevailing outlook for commodity prices and the falling costs of construction.”
He said recent problems had not changed Rio’s long-term outlook for China, arguing hundreds of millions of people would need new homes, schools, factories and infrastructure as the Asian giant’s cities expand over the next 20 years.
Rio has responded to the downturn by cutting 14,000 jobs globally, attempting to reduce debt to US$10 billion by the end of the year and slashing this year’s capital expenditure by more than half to US$4 billion.
The mining company warned that if it failed to complete the Chinalco deal and could not sell assets or raise funds from other sources, it may be forced to renegotiate its US$40 billion of debt on tougher terms.
Australia’s government on Monday delayed a decision on whether to approve the investment by the state-owned aluminum firm amid growing concern over foreign ownership in the key sector.
A review of the proposed investment by Chinalco was extended by 90 days to allow scrutiny of the deal, the Treasury said.
Australian Trade Minister Simon Crean said the criteria the government used when assessing whether foreign investments were in the national interest included considering the contribution they would make to economic growth.
“Our national interest is to go for growth because through growth you create the job opportunities,” Crean told reporters.
He said the government wanted to ensure that Australia was self-sufficient when it came to meeting its energy needs.
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