Will Yancoal’s Chinese Communist Party ties help or hinder its next big takeover bid?

Chinese mining company Yancoal is hoping to raise $3.2 billion to buy coal assets in the Hunter Valley, as well as a significant stake in Newcastle Port. If successful, the move would make Yancoal the biggest pure-play coal producer in Australia.

With Rio Tinto’s shareholder’s set to vote on the deal as soon as April, the proposal is coming under increased scrutiny.

The proposed deal has already attracted controversy, with opposition politicians suggesting that the deal could ultimately give the Chinese government price-setting control over Australian coal exports.

Despite being listed in Australia, Yancoal has close ties to the Chinese state.
Six of Yancoal’s 12-strong board have previously worked for Chinese government-controlled enterprises and Yancoal is 78 percent-owned by Yanzhou Coal, itself majority-owned by Yangkuang Group Company.

Yangkuang in turn is wholly-owned by the Chinese state – with the company chaired by the Secretary of the Chinese Communist Party Committee of Yangkuang.

Last year it was revealed that Chinese businesses were by far the largest foreign-linked donors to both political parties, with Beijing reportedly seeking to gain greater influence in Australia.

Yancoal’s bid comes at a time when foreign investment in Australian national assets are increasingly under the spotlight, with the Treasurer last year intervening to block Chinese companies from buying a majority stake in the country’s largest energy grid.

The federal government recently announced that long-term geopolitical considerations, as opposed to more immediate national security concerns, will be given more weight when it assesses foreign bids.