JOHANNESBURG (miningweekly.com) – There was strong potential for increased commodity-related mergers and acquisitions (M&As) activity by Chinese players abroad and in Africa, said Frontier Advisory CEO Dr Martyn Davies.

Davies, who is also executive director of the Centre for Chinese Studies at the Stellenbosch University, told Mining Weekly Online that China certainly had the cash to take advantage of acquisitive opportunities.

Any foreign investment in the commodities market in Africa would also be welcome, he asserted, especially during such difficult economic times.

“People need the capital and if China wants to spend it, all the better,” he commented.

Another South African-based economist specialising in Chinese markets, agreed that M&As between Chinese and African companies in the mining sector were likely, as China would require a stable supply of commodities to grow its economy.

Newswire Reuters on Friday quoted the Shanghai Securities News as saying that the Asian giant planned to set aside funds to support local companies wanting to pursue mining resources abroad.

This formed part of a stimulus plan for the country’s steel industry, the newswire reported.

Meanwhile, Davies said that African commodity exporters could potentially see increased demand for its products from China in the second and third quarters of the year.

He explained that China’s growth had not declined just as a result of a drop-off in US consumer spend.

China had sabotaged its own economic growth in 2006/7 as it was growing too rapidly, leading to inflationary concerns, asserted Davies, noting that the country had slowed down its own economy by cutting back on its infrastructure spend.

This had resulted in a drop-off in commodities imports into China.

However, the global economic crisis and the meltdown of the US financial markets had led to a steeper decline in economic growth than anticipated and planned for by China.

The country had now decided that it would need to boost its primary economy again and has spent the last quarter on getting its economy going again, said Davies.

Davies expected China’s growth to pick up again to 7,5% or 8% in the next two quarters, which would be good news for African commodities exporters.

China’s State-owned aluminium producer Chinalco and diversified major Rio Tinto earlier this month announced that they were in talks regarding a $19,5-billion deal, in which the Chinese producer would take a stake in a number of Rio Tinto’s mining operations worldwide.

Further, Australian zinc-miner Oz Minerals has agreed to a $1,7-billion takeover bid from China’s Minmetals.