The whole Rio Tinto takeover drama has taken an interesting turn. First, Rio rejected outright, a $140 billion takeover overture from BHP Billiton. Then, there was speculation about a possible white knight move by Anglo American. After that came a report that the Chinese government could be funding a takeover bid – a rumour strong enough to lift the price of Rio stock. Shortly after that, we were treated to an official denial of the rumour by the China Investment Corp., the Chinese government’s investment arm that is backed by that country’s $1.3 trillion foreign exchange reserves.

Analysts had been saying all along that a Chinese government involvement in the takeover bid would raise big regulatory obstacles. China’s global takeover ambitions have raised a lot of xenophobic hackles everywhere, not the least in the US, where as long ago as 2005, there was an angry upwelling in Congress when China’s state-owned oil firm CNOOC bid $18.5 billion for the US oil firm Unocal.

Then in September this year, China’s $5 billion aid package for the Democratic Republic of Congo (DRC) in return for mining rights and infrastructure leasing fees, again raised concerns in the US and other industrialised nations about spreading Chinese influence. The Congolese didn’t care, they accepted the offer. The global diamond industry is wondering whether it’ll see any diamonds from the DRC on the open market in future.

Back to Rio Tinto and the BHP Billiton takeover bid. China’s was one of the loudest voices in opposition to the bid as both firms are already giants in iron ore mining and a merged Rio-BHP entity would have an unprecedented amount of pricing clout in the global steel market. A Chinese takeover bid would be a nice way of stopping that – and give the Chinese more control over vital resources to fuel that country’s explosive growth. So I wouldn’t write off the whole Chinese intervention possibility altogether. There could well be something more subtle brewing here. Remember it was the Chinese warrior philosopher Sun Tzu who wrote The Art Of War, considered the bible of international relations and business strategy by many multinational corporations today.

I’ve been having fun trying to work out what a Chinese takeover of Rio would mean for the diamond industry. Just imagine – all of Argyle and Diavik’s output straight to Shenzhen! There are undoubtedly people in Antwerp, Ramat Gan and Mumbai fervently praying that the rumours of the Chinese bid are really not true.

By the way, all these rumours could also well be part of a Rio defence strategy against the BHP bid. A rumour here and another one there and the price of Rio stock keeps going up – making the original BHP offer that much less attractive as it was an all-stock bid based on valuations of Rio stock at that time. Sun Tzu would have loved that!