Mittal urges China to relax investment rules

Lakshmi Mittal has called for Beijing to reduce its restrictions on inward investments to help damp hostility to efforts by Chinese companies to take stakes in businesses in countries such as the US.

“You cannot expect business people in the US to be relaxed [about planned inward investments by Chinese companies] if their attempts to do the same thing in China are covered by restrictions,” the chief executive and main owner of ArcelorMittal said in an interview with the Financial Times in Tokyo.

Mr Mittal was speaking in light of a row in the US over a planned participation by Anshan Iron & Steel, one of China’s biggest steelmakers, in a $168m venture to build a steel plant in Mississippi by John Correnti, a veteran US steel executive.

The head of the world’s biggest steelmaker – whose own efforts to expand in China have been hampered by Beijing’s inward investment rules – said he was, in principle, relaxed about plans by Anshan to take a minority stake in the plant.

“In today’s free market, I don’t think you can stop projects by Chinese companies to expand overseas,” he said.

But Mr Mittal added that in thinking about this issue, Beijing had to become more relaxed about the conditions under which foreign companies could participate in running China-based businesses.

“There has to be a two-way aspect to policy,” Mr Mittal said.

Mr Mittal has had plans to expand in China – by far the world’s biggest producer and consumer of steel – for some years.

But so far, he has been allowed only to take minority stakes in two medium sized China-based steel producers, rather than take control of large ventures, as he would have liked.

Behind this is the refusal by the Chinese government to allow non-Chinese companies to take majority stakes in business fields that Beijing regards as “strategic” to the country’s long-term interests, one of which is the steel industry.

In the case of the this industry, it is fairly easy for Beijing to stop foreign ownership since most big Chinese steel companies, including Anshan, are state-owned.

The plan by Zhang Xiaogang, Anshan’s president, to link up with Mr Correnti has run into strong criticism by large US steelmakers on concerns that it would lead to other efforts by Chinese steelmakers to set up plants in the US, which in turn could lead to new competitive pressures.

The US industry believes that companies such as Anshan are helped by hidden government subsidies that give them an unfair advantage.

Mr Mittal also gave further details of his new thinking on setting up steel plants in India in the next few years.

Confirming that plans to set up two big steel sites producing between them 24m tonnes of steel a year by 2015 were highly unlikely to be realised, Mr Mittal said his new strategy was to have a number of smaller steelmaking hubs in different parts of the country each capable of making a few million tonnes of steel a year.

“My plan is now to have 2-4 sites rather than concentrate everything on large plants,” Mr Mittal said. However, he gave no time frame for when these units could come into operation.

Mr Mittal’s original scheme to spend about $20bn on two large steel plants in Jharkand and Orissa was put on hold last year after difficulties in persuading farmers and others in selling the land that is needed.

However, Mr Mittal said he was still “determined to participate” in the steel industry in India where demand for the metal is increasing quickly as a result of new investments in industrial expansion and infrastructure development.