Rio Tinto Taps Feng Shui Seeking Good Fortune in China
Standing at 1.2 meters, or almost four feet, the statue cut from the gemstone has a prime view of Shanghai from the company’s office on the 40th floor of the Wheelock Square building. It’s meant to help avoid any repeat of the rocky relationship the world’s second-biggest mining company has had with China, its largest customer and shareholder.
“When we designed this office, we asked a feng shui master to give us some guidance” and he said it was very important to have a jade horse in a pool of water, London-based Rio’s China managing director Ian Bauert, said in an interview, “So the good Qi comes in, the good spirit comes in to recirculate and makes us a prosperous and happy company in China.”
While Rio has lost share to archrival BHP Billiton Ltd. (BHP) in China since the trouble welled up in 2009, it nevertheless increased Chinese sales 72 percent to $19.5 billion in the three years through June 30. BHP boosted Chinese sales 119 percent to $21.6 billion in the period.
Since the fallout from 2009, the company has “improved its position substantially,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne, including Rio shares. He credited Rio’s efforts without commenting on any potential luck from the horse, which was built from white jade.
Rio, the world’s second-biggest iron ore exporter, competes with BHP and Brazil’s Vale SA to feed China’s $82 billion a year appetite for the steelmaking material. With stakes that high, any help Rio can get to maintain smooth relations with China’s government is welcome, after the jailing of company executive Stern Hu two years ago and the collapse of a $19.5 billion investment deal in 2009.
“Competition for Chinese market share is getting more fierce,” said Xu Xiangchun, chief analyst with researcher Mysteel.com, “Having a good relationship with the Chinese government and steelmakers is critical for the miners.”
Rio’s shares have lost about 5.3 percent in Australian trading this year, compared with a 2.1 percent decline by BHP and a 2.9 percent drop in the Bloomberg World Mining Index. (BWMING) The best performer on the 118-member benchmark was China’s Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., up 77 percent.
The arc in Rio’s fortunes in China date to 1973, when it says it became the first foreign company to supply iron ore to the Asian nation. Since then Rio has shipped more than 1 billion metric tons. China generated sales of about $20 billion in calendar year 2011, or 33 percent of Rio’s total, and almost double that of North America, its second-largest market. Rio doesn’t break out earnings from China.
Rio, BHP and Vale are jostling for an edge in supplying the world’s fastest-growing major economy with key commodities such as iron ore, copper and aluminum. By 2030, China will need to build 50,000 skyscrapers -- equal to ten New York cities -- and there will be 221 cities with populations of more than 1 million, compared with 35 in Europe today, according to estimates from the McKinsey Global Institute.
The running jade horse, designed by Beijing-based Taiwanese artist Huang Zhiyang, is 1.6 meters long and 0.35 meters wide. It has steel frame set with jade pieces and stands in a pool of water. In China, water is a symbol of wealth and when spoken the word has a similar sound to “cai,” a word for money or wealth.
“A horse can reflect the owner’s wish to have swift changes, or to enhance business quickly,” Hong Chen, a feng shui master, who didn’t participate in the consultation for Rio Tinto, said in a phone interview from Beijing, “Jade is valuable and noble.”
Feng shui is a traditional Chinese method of arranging the human and social world in auspicious alignment with the forces of the cosmos, including qi and yin-yang, according to the Britannica Concise Encyclopedia. It was devised during the Han dynasty (206 BC-220 AD) and involves diviners using compass-like instruments to determine the cosmic forces affecting a site.
On the feng shui master’s advice, the horse is located in water on the opposite side of the building overlooking the Jingan Temple, Bauert said. “He said it was very important.”
The earth-red water feature also reflects the origins of Rio back in 1873. That’s when British and European investors bought the ancient mines beside the Rio Tinto, or Red River, in southern Spain, Adam Robarts, co-founder of Beijing-based Robarts Interiors and Architecture, said in an e-mail. Robarts was commissioned to design the offices and his clients include Deutsche Bank AG, the Carlyle Group and Toyota Motor Corp.
The statue with its exposed steel creates “a contemporary sculpture whilst still evoking the historic Han dynasty running horse that was its inspiration,” Robarts said.
Back in 2009, Rio, which has been doing business with China for more than 50 years, ran into deeper water when Hu and three colleagues were arrested in July, a month after the then debt- laden company rejected a $19.5 billion investment from its biggest shareholder, Aluminum Corp. of China, or Chinalco.
The arrests raised tensions between Australia and China and prompted Chief Executive Officer Tom Albanese in August 2009 to concede his company faced a “number of challenges in China.”
Hu, an Australian citizen, was sentenced in March 2010 by a court in Shanghai to 10 years jail after being found guilty of taking bribes from steel mills and infringing commercial secrets.
Rio’s position is far better than it was after Chinalco’s failure, said Pengana Capital’s Schroeders. It has made “substantial efforts to build up goodwill to make sure they have a package of ongoing business with Chinese because it’s very important,” he said.
Aluminum Corp. of China Ltd., Chinalco’s publicly traded unit, agreed in July 2010 to pay $1.35 billion for a stake in Rio’s Simandou iron ore project, making its first investment in the commodity. Rio and Chinalco also formed a venture in China last year to look for copper, coal and potash deposits, aiming “to be a strategic partner to China in the supply, development and also the discovery of those resources,” according to Albanese.
“We want Rio Tinto to be a reliable and valued contributor to China’s long-term development,” said Bauert. “We expect to spend $1.5 billion this year buying Chinese goods and equipment for our mining operations and we have joint ventures in Australian and Guinean iron ore and Chinese exploration with Chinese partners.”
Rio in January last year opened a Chinese-language website, which shows a list of Rio Tinto’s global news and its deals with China, introduces its products, and links to a statement that said employees shouldn’t be involved in bribery. Vale also runs a Chinese website, while BHP doesn’t have one.
It isn’t just Rio that’s looked to incorporate feng shui into their offices. Geomancers in feng shui have been consulted on the design of buildings and offices across the globe.
Such projects range from the Hong Kong headquarters of HSBC Holdings Plc, Europe’s biggest bank to the Beijing offices of Freshfields Bruckhaus Deringer LLP, the number two legal adviser on mergers and acquisitions, and homes being built in California’s Orange County.
Hong Kong taxpayers paid at least HK$72 million ($9.3 million) over the past decade for feng shui arising from infrastructure projects, the South China Morning Post reported in November 2010.
“Consulting feng shui is increasingly being adopted by overseas companies doing business in China,” Hong Chen said. “Explicit symbols of feng shui are used in office designs to catch the attention of their Chinese clients.”
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