China has the money and the motivation to mount a bid for Rio Tinto, but actually doing so would mark a U-turn in the recent “going out” strategy of the country's state-owned companies.

China remains deeply scarred by two rebuffs, both in 2005, in its quest to secure energy and minerals to feed its thrumming economy. A bid by Minmetals Corp for Noranda, of Canada, was blocked by political objections, just as the oil giant CNOOC's $18.5 billion offer to buy Unocoal, the Californian refiner, was scuppered by nationalist outrage on Capitol Hill.

China Inc has spent the past three years licking its wounds and learning the lessons of those twin failures. Chief among them is a realisation that, no matter how deep its pockets, any company ultimately controlled by China's Communist Party will arouse suspicions in the West about the motives for its investment.

So Chinese companies, banks and insurers have sought to allay such concerns by taking minority stakes and promising to be good corporate citizens. Small deals are also easier to digest for managers who lack experience running big international companies. Thus Industrial and Commercial Bank of China paid $5.6billion last year for 20 per cent of Standard Bank, of South Africa; China Development Bank, which financed Chinalco's $14.2billion raid on Rio Tinto, paid $3 billion for a 3.1 per cent stake in Barclays to help its doomed bid for ABN Amro; and Ping An, the insurance firm, spent $2.7 billion on 4.2 per cent of Fortis.

China Development Bank and other state-owned lenders would be able to raise the $150 billion-plus that it would take to mount a bid for the rest of Rio. China's banking regulator recently refused CDB permission to help to bail out Citigroup, balking at the risk, but Rio is different: Beijing clearly attaches greater importance to securing supplies of oil and ores.

A bid for Rio would still be audacious. For a start, it would have to pass muster with Australia's Foreign Investment Review Board, which in 2001 blocked an attempted takeover of Woodside Petroleum by Royal Dutch Shell on the ground that it was not in the national interest. Many analysts believe that an attempted Chinese takeover of Rio would meet the same fate, even though Australia's economic boom owes much to demand from China and though Kevin Rudd, the Prime Minister, has made it a priority to strengthen ties with Beijing.

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