Rupert Steiner: Shine a light on shadowy state investors

This is the one time of year when most of us open our doors and spread a bit of festive cheer to friends and neighbours. But in the City, such welcoming bonhomie is a year- long affair few M&A suitors, if any, ever get turned away from the inn that is corporate Britain.

As a country we pride ourselves on our liberal approach to our assets. We wholeheartedly embrace market forces, with no exception. Our airports get sold to the highest bidder, our stock market is considered fair game, and if our banks want to set up shop in Holland, that's OK too. Other countries are less welcoming. Last year America blocked the sale of several of its ports to Dubai Ports World, and in 2005 it stopped the sale of petroleum company Unocal for $18.5bn (9.2bn) to the state-run China National Offshore Oil Corporation.

Last week it emerged that another British firm, the London-based Rio Tinto, the world's third-largest mining company, is being stalked by the Chinese.

Baosteel, one of China's top steelmakers, was said to be considering a bid. Its chairman, Xu Lejiang, indicated he would fork out around $200bn, making it one of the largest buyouts ever.

Rio is in demand. It has just rejected an approach from larger rival BHP which would create the world's 16th-largest firm with a market value of 176bn.

Thriving corporate activity is vital for the lifeblood of the glo-bal economy, but is there a point where it becomes undesirable for a large concentration of the world's minerals or a country's strategic assets to rest in the control of one party?

The answer depends on who ultimately controls that party and what regulation it recog-nises. So a sale of Rio Tinto to BHP, the world's biggest miner, might create a monster mining group and it might result in an undesirable concentration of resources, but the giant would be subject to market forces, financial regulation and the pressure of public scrutiny.

This is very different to the sale of an asset to a "company" in which a government holds a significant stake, or indeed to a sovereign wealth fund.

SWFs are investment vehicles owned by governments, which use them to invest their national savings. The Chinese, the Uni-ted Arab Emirates and Singapore have them, among others. SWFs operate in total secrecy and answer only to their paymasters and they are growing.

In September, China's Anshan Iron & Steel agreed a $1.6bn joint venture with the Australians. A month before that, China's Aluminium Corp bought Peru Copper for $860m. And last year Cnooc, China's third-biggest oil producer, bought a big oil field in Nigeria for $2.7bn.

As the deals become more frequent and get bigger, even the more liberal-minded governments will be forced to pick between maintaining their capitalist stance and protecting their disappearing assets.

SWFs have been around since 1953 and are here to stay. They are already valued at $2.2 trillion and Gerard Lyons, chief economist at Standard Chartered, suggests they could reach $13.4 trillion within 10 years. He says there is a serious likelihood of Western governments and SWFs clashing over what they can buy and that a protectionist backlash against strategic investments is real and threatens global trade.

But as with private equity, which has been slammed for the way it operates in the shadows, there is another way. Norway's SWF adheres to a more open and transparent best practice.

But governments will argue that it is their money and why should they be forced into transparency when it is not a requirement for private equity, which has agreed to a voluntary code of conduct, or other areas of the financial markets.

So while the sale of Rio to a government-backed firm might go through in the current climate, it is only a matter of time before we see more blocked deals.

That is unless governments, along with their front companies, adopt some form of corporate governance.

New dawn in Murdochland

What a difference a couple of years makes in Murdochland. In 2005 a relative new boy to both British media and the country, James Murdoch, the newly appointed chief executive of BSkyB, was forced to tell shareholders he was committed to the broadcaster for the long-term following the sudden resignation of his brother Lachlan as deputy chief operating officer of News Corp.

Now, after the news last week that he has moved on to bigger things within the group, there is confirmation not only that James has stepped into Lachlan's shoes as heir apparent, but also of what long-term means in Murdoch parlance.

To be fair, James has performed a blinder. He took the BSkyB job amid cries of nepotism, yet under the spotlight he has grown user numbers and the business. One of his few blots is the 940m stake bought in ITV. It has lost value and the move was censured, but it did achieve its strategic goal.

So having earned his stripes James is now number three in the News Corp empire a relief for his father, 76, who has always been determined to leave the business in the hands of a Murdoch.