AMP pulls out of China deal

SYDNEY - AMP's aim of entering the lucrative Chinese market has suffered a setback as the financial services group dumps plans to invest in CPIC Life Insurance.

AMP was reportedly close to buying up to 25 per cent of the Chinese insurer in a deal worth about $A800 million ($985.4 million).

But it will not go ahead with the deal after deciding the final proposal did not meet its investment criteria.

"After careful consideration of a final proposal, I have today recommended to the board of directors that the company does not proceed," AMP's chief executive Paul Batchelor said yesterday.



AMP had hoped a deal with the group would give it a strong foothold in the potentially lucrative Chinese market.

Mr Batchelor said the time AMP had spent investigating the Chinese market had been valuable and confirmed the attractiveness and potential of China's insurance industry.

"AMP's strategy of expanding from our home bases by taking our core skills to selected new markets is unchanged," he said.

"We remain interested in securing a presence in China in the medium to longer term, and will therefore maintain the strong relationships we have established with regulators and officials.

"While I am disappointed not to have the opportunity to make an investment in China at this stage, we will proceed with investments only when it is clear that shareholder value can be enhanced."



Recent reports had suggested that details of the investment had been agreed by both parties and sent to China's regulators for approval.



Meanwhile, Rio Tinto Group, the world's third-biggest mining company, has agreed to form a $US64 million ($155.3 million) joint venture to build a new mine and supply iron ore for 20 years to Shanghai Baosteel Group, China's top steelmaker.

Rio's Hammersley Iron unit will own 54 per cent of the venture in the Pilbara region of Western Australia.

Baosteel will buy an average of 10 million tons of iron ore a year.

"The joint venture will consolidate Hammersley's position as the leading supplier of iron ore to China," Hammersley chairman Chris Renwick said.

The venture is another move by Baosteel to lock in supplies of ore.



It said in August it planned to buy a stake in an Australian iron ore mine owned by BHP Billiton Group, the world's biggest mining company.

The steelmaker also has a $2 billion agreement with Cia Vale do Rio Doce of Brazil, the biggest iron ore exporter, to buy ore for 20 years.

Baosteel imports 99 per cent of its iron ore and wants more control over raw material supplies to help it compete with bigger rivals.