ABSTRACT
Proponents of the argument that preferential access to state financing distorts the competitive landscape conclude that Chinese state-backed procurement negatively impacts the ability of private sector actors to compete on commercial terms. There are other important parallels between China's iron ore procurement experience following its demand shock to the experiences of Japan once capital export controls were lifted in 1971. One of the main similarities between Chinese and Japanese iron ore investors is their general lack of expertise in developing complex iron ore mine projects by the investor. The inability of China Union to finance the project led to the sale of the concession, but no Chinese SOE steel company wished to purchase it due to the perceived risks of doing business in Liberia. Analysis of Chinese iron ore procurement arrangements shows that state-owned financing institutions were involved in the majority of investments and that most investments were undertaken by central and provincial SOEs in concert with non-Chinese partners.
