Market Watch reported that China's government plans to impose trading sanctions on Rio Tinto and BHP Billiton Ltd if the two mining giants follow through with a deal to join their iron-ore businesses without permission from Chinese competition authorities.
According to an article in the Sydney Morning Herald, China Central Television reported on Thursday that the Ministry of Commerce said the BHP-Rio joint venture would be reviewed by the nation's competition regulators and both companies would have to apply for permission.
Mr Ma Yu the director of the Foreign Investment Department at the Ministry of Commerce's Academy of International Trade and Economic Co-operation was quoted by the Herald as saying that "According to China's antitrust law, we can veto such a merger agreement if the concentration of overseas business operators will affect domestic market competition."
A week ago, Rio Tinto announced the deal with BHP Billiton to establish a production joint venture that will cover both of the companies' Western Australian iron-ore assets. The news came on the same day Rio said it decided to reject a USD 19.5 billion deal to sell part of itself to China's Aluminium Corp also known as Chinalco.