The global credit squeeze has pushed more deal makers away from banks and towards alternative sources of funding such as China, but politics could hamper for years Beijing's ambition to make a major corporate acquisition.
China, flush with cash from booming trade and soaring stock markets, is mentioned routinely in almost every deal that surfaces, but Beijing's reputation for not playing the trade game fairly is likely to limit its acquisitions to secondary markets and companies or minority stakes with strings attached.
"It will take a long period of time before the West's hostile attitude towards Chinese companies disappears," said Sun Zhe, a professor of American Studies at Fudan University in Shanghai.
"We may not see any major acquisition by a Chinese company for 5-10 years," he said. Aside from political issues, Sun said Chinese executives lack the international experience to manage a large acquisition.
"It's a learning process, from many perspectives," he said. Responding to the latest rumour, China Development Bank on November 12 denied it had bought a small stake in Rio Tinto, a sign - according to a British newspaper - that Beijing had its eye on the world's third-largest miner.
The stiffest opposition to China's corporate expansionism comes from the United States, where product safety, a huge trade surplus and weak yuan are rich fodder for debate ahead of the presidential election.
Lenovo's 2005 acquisition of IBM's loss-making personal computer business is possibly China's boldest move to date, but US political opposition put paid that year to state-backed oil firm CNOOC's $18.5 billion bid for US peer Unocal.
Now, European policy makers have joined the Americans in openly criticising Beijing for undervaluing the yuan, making mainland exports cheaper and putting upward pressure on the euro.
European Central Bank chief Jean-Claude Trichet will lead a group of finance ministers to China this month to discuss the yuan. The rising pressure on China comes as the mainland posted a record trade surplus of $27 billion in October.
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"Any significant take-over of a strategic company would be highly unlikely," said Glenn Maguire, Societe Generale's chief economist for Asia. "There are a whole range of political concerns, which to a degree are very valid."
Beijing understands that Australia is unlikely to allow a foreigner to buy Rio, a major resource company, but some bankers said Chinese resource firms could team up with BHP Billiton Ltd/Plc to help finance the industry's biggest take-over.
That was the strategy Bain Capital used when it pulled together last month a $2.2 billion deal for 3Com Corp, in which three of the lenders are from China, including Huawei, the country's biggest telecom gear maker.
US lawmakers raised national security issues, citing Huawei Technologies Co's lack of transparency and ties to China's army and intelligence services. To ease those concerns, Huawei would only take a minority interest, and not have access to sensitive US technology nor operational control of 3Com.
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"It is mostly political," said Qian Wang, an economist with J.P. Morgan based in Hong Kong. "Chinese companies are certainly concerned" about the political risks associated with taking stakes in large foreign companies."
That risk has led China to increasingly invest in emerging markets such as Africa, attracting even more flak from the West, which says Beijing turns a blind eye to corruption and human rights abuses while chasing its business interests.
China's biggest bank, ICBC, said last month it would pay $5.6 billion for 20 percent of South Africa's Standard Bank, the biggest overseas acquisition by a mainland bank and the largest foreign investment in Africa.
Industrial & Commercial Bank of China has said it wants to expand globally, but its acquisition strategy will focus on emerging markets.
ICBC and Bank of China have also been mentioned in media reports as possible bidders for Northern Rock, a British victim of the mortgage credit crunch.
While technical issues due to the greater transparency and accountability required by legislation such as Sarbanes-Oxley in the US are also barriers for many Chinese companies, their ties to government agencies are a sticking point, too.
The small 6 percent stake in US brokerage Bear Stearns taken by China's CITIC Securities Co Ltd raised national security issues last month by US lawmakers, who were concerned by CITIC's close state ties.
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