China planning to buy stake in BHP Billiton: report

SYDNEY (Reuters) - China is planning to buy a more than 9 percent stake in miner BHP Billiton Ltd (BHP.AX: Quote, Profile, Research, Stock Buzz) (BLT.L: Quote, Profile, Research, Stock Buzz) in a bid to interfere in BHP's proposed acquisition of rival Rio Tinto Ltd (RIO.AX: Quote, Profile, Research, Stock Buzz), The Australian newspaper reported on Wednesday.

Chinese companies and officials have expressed strong opposition to BHP's $135 billion bid for Rio, citing concern that a combined company would have too much control over the prices of raw materials vital to China's booming economy.

Citing unidentified sources in Beijing, the report said Chinese authorities had yet to decide which state-owned financial institution might take a lead role in seeking sellers from within BHP's diverse shareholder base.

A BHP spokeswoman declined to comment.

"I always thought that was the right way for them to play this, said Adnan Kucukalic, equity strategist at Credit Suisse First Boston.

"Effectively, they are the ones underwriting the entire resource sector. If I was confident about my demand for resources, why wouldn't I hedge myself against that? I would be owning part of BHP and Rio."

Chinese state-owned Chinalco bought a 9 percent stake in Rio Tinto for $14 billion in February, just weeks before BHP launched its all-stock offer. Rio has rejected the BHP bid.

The latest report comes as Australian Prime Minister Kevin Rudd visits Beijing on Wednesday to meet his Chinese counterparts.

Australian Resources Minister Martin Ferguson said the government would treat any request by a foreign company for approval to take a stake in an Australian company in a fair and open manner.