Bursting with cash, Chinese state-linked companies and sovereign wealth funds have become highly desirable allies. They are on hand to offer a stamp of approval or, in difficult times, more substantial help. This year, Chinese banks have taken stakes in Barclays, Bear Stearns and South Africa’s Standard Bank, while the state’s wealth fund, China Investment Corporation, has a holding in Blackstone. Generally, whatever the long-term goals, the stakes have been passive, yet targets have played up the strategic benefits of links with China. It’s a win-win.

But can it last? Chinese companies have been talking about taking a stake in miner Rio Tinto, the target of a bid from BHP Billiton. China is worried that a BHP/Rio deal would place excessive pricing power in the hands of a single company. No concrete plan has emerged, but Rio’s existing investors have cause for concern, even if a stake stopped short of blocking a deal. There is a conflict of interest between a Chinese state-backed investor interested in, for example, keeping iron ore prices low and other investors who are quite keen on the opposite. A holding of more than 15 per cent of dual-listed Rio’s Australian shares could be blocked under foreign ownership rules. However, even a smaller stake could provide real influence, and possibly board access. Any corporate governance struggle could change the tone of Chinese stake-building in the west.

Creating new barriers to foreign investment is undesirable, but it is not clear that existing governance rules will be sufficient to ensure a fair deal for all investors. The best hope for now is that China’s wish to secure access to natural resources will be tempered by its interest in remaining an attractive co-investor. As it found two years ago, when CNOOC’s bid for Unocal was blocked by the US government, having one’s money sniffed at is no fun.

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