If the Rio-BHP deal is approved, the two iron ore giants will control 75 percent of all iron ore imported by China.

"If you don't call this (Rio and BHP agreement) a monopoly, then there is no such a thing as monopoly," said Xu Xiangchun, an iron and steel expert. Xu said the deal was still being examined by Chinese monopoly checks.

Chinalco said it was a pity that the deal collapsed. But domestic companies should reflect on the reasons that led to the breakup.

In February this year, Chinalco proposed a $19.5-billion money injection into the debt-laden Rio Tinto, in the hope of securing a stake in the world's third largest iron ore producer. Rio broke the deal four months later but entered into a new one with the world's second largest producer, BHP.

A Weak-Weak Alliance?

Two of the nation's biggest loss-making airlines-China Eastern Airlines and Shanghai Airlines-are expected to merge soon, with the latter becoming a total subsidiary of the former.

They lost a total of 16.5 billion yuan ($2.4 billion) last year. The debt-laden airlines are both under special treatment on the mainland A-share market, while the stock exchange has warned Shanghai Airlines investors of possible delisting.

The merger will supposedly give the two airlines about half the market share in Shanghai, the host city of the World Expo 2010 and one of the most vibrant ports in the world.

But monopoly does not necessarily create a cash cow. Critics are not optimistic about the proposed merger unless there is a massive government cash injection, because neither of the two airlines is capable of acquiring the other.

Eastern Airlines had been teetering on the edge of bankruptcy off and on for years even before the financial crisis.

The failure to make profits is due largely to shortcomings in the domestic aviation management system, namely that carriers, which are mostly state-owned, are used to receiving government help whenever they encounter money problems.

Going Further Out

China loosened controls on domestic companies' overseas investment and agreed they can invest as much as 30 percent of company equity to fund their overseas subsidiaries.

The State Administration of Foreign Exchange (SAFE) announced the new rules on its website. They will be effective from August 1 this year. Previously, lending and funding of overseas subsidiaries were under heavy restrictions, and open only to large multinational companies.

SAFE said the loosened rules aim to support the overseas expansion of domestic firms, which are having trouble raising money due to the global financial meltdown.

"We have done a stress test, and the maximum possible capital outflow from this new mechanism will be $30 billion," said Sun Lujun, a SAFE official.

Meanwhile, the foreign currency watchdog will set up a risk control mechanism to check outbound investment to make sure the money is used properly.

Domestic companies, though cheered by the relaxed policy, are still fledgling in overseas investment, and should be wary of potential risks.