Sino-Japanese cooperation grows in Mongolia

China’s aggressive efforts to secure natural resources around the world have sometimes made it an opponent of other importing nations, most recently South Korea. But a shared hunger for commodities can bring countries closer to together too.

Take Tuesday’s deal between Mitsui, one of Japan’s biggest trading houses, and Shenhua, the Chinese state-owned energy and mining company. The two groups agreed to work together to develop coal deposits in Mongolia, and perhaps in other countries in the future.Most of the coal is likely to be sold to Chinese power plants, but some will also find its way to Japan, according to Mitsui. The Japanese group will take a share of the profits regardless, making its investment a partial bet on further growth in Chinese demand.

That fits with Japanese trading companies’ strategy of piggybacking on China’s growth.

In 2008 Itochu, another trading house, paid $710m for a 20 per cent stake in Ting Hsin, a big Chinese food processing group.

It is also working with Cofco, China’s state-owned food processor, to buy grain and other agricultural commodities in global markets, in an effort to build pricing power and combat rising food costs.

Another Japanese trader, Marubeni, has entered a soyabean-procurement deal with Sinograin, the Chinese state-owned grain importer.

As with Itochu and now Mitsui, it hopes to bring the experience in risk management, distribution and project finance that it has honed gathering resources for Japanese industry to bear on China’s vast market.

If joint development can improve efficiency to the benefit of all parties, perhaps other commodity competitors will learn to share and share alike.