Overseas investment mania by Chinese companies, and those in the natural resources sector in particular, has resumed since the financial storm has made foreign assets cheaper and more accessible. A revitalization program put in place earlier this year also encourages domestic steelmakers to go global.

But the deal still faces an array of uncertainties including reviews by both Chinese and Canadian governments. The Chinese steelmaker has been prudent because Australian regulators recently rejected China Minmetals Group's $1.8-billion bid for OZ Minerals Ltd. on national security grounds.

Nevertheless, it is believed that the investment would help WISCO secure raw material supplies, including iron ores and coal. The partnership also would bring capital needed for the Bloom Lake project as well as double Consolidated Thompson's production capacity to 16 million tons of iron ores annually, said Richard Quesnel, CEO of Thompson, in a statement.

"We view the deal as a strategic step in the long-term relationship with WISCO," he said.

Pumping Liquidity

The People's Bank of China, the central bank, has siphoned 480 billion yuan ($70.2 billion) from the banking system through the sale of central bank bills in the first quarter of this year, a steep drop of 1.3 trillion yuan ($190.2 billion) compared with the same period last year.

Last year, the bill was used as an instrument to offset money supply increases in circulation brought about by foreign exchange inflows, including the trade surplus, foreign direct investment and international hot money.

In 2008, the central bank stopped issuing one-year and three-year bills to ensure a free-flowing credit market.

But as the financial storm spills over to China, the central bank has taken a cautious approach to the bill auction that may further soak up liquidity in a slowing economy.

The bills issued from January to March all had three-month maturities and can be redeemed in the second quarter.

Cross-Border Funding

The Export-Import Bank of China (China Exim Bank) has recently inked a memorandum of understanding with the Inter-American Development Bank (IDB), according to a report by Xinhua News Agency.

The agreement was reportedly designed to finance Chinese investments in Latin American and Caribbean nations amid the global credit crunch.

"The agreement is believed to help Chinese enterprises gain a firm foothold in the Latin American area and facilitate bilateral cooperation, said Zhu Hongjie, Vice President of China Exim Bank.

The deal was signed during the 50th yearly meeting of the IDB on March 27-31.

Founded in 1994, the Chinese policy bank has funded a series of Chinese projects in Latin America.

Easing Trade Credit

To prop up anemic imports and exports, China has taken steps to inject more liquidity into financing to lubricate a large number of foreign trades.

On March 27, the State Administration of Foreign Exchange (SAFE) announced it would increase the short-term foreign debt ceiling for financial institutions by 12 percent this year.

According to the announcement, domestic financial institutions are allowed to borrow short-term foreign loans of up to $32.9 billion in 2009 to help domestic companies with trade financing and contribute to economic recovery. Short-term debt refers to foreign loans with maturities of less than a year.

This is a marked trade credit easing move after continuous undercuts of the quota in the past two years, when inflationary fears loomed and appreciation pressure mounted on the renminbi.

"It will deliver a solid boost to many exporters that are struggling in a credit freeze and help heal the weakening health of the real economy," said Ding Zhijie, a finance professor at the University of International Business and Economics, in an interview with the The Beijing News.

But fears are also growing that market risks might come roaring back with the outpouring of foreign debt, given the deepening domestic business gloom. The SAFE also said in the announcement that massive cross-border capital inflows present uncertainties to the economy. In defense, the regulator pledged to keep a close watch over capital movements in risky sectors and make risk aversion a priority.