China's advantage is cheap financing

One reason Chinese companies are starting to make a major splash in global mergers and acquisitions is their enviable access to cheap funding.

Consider the sweet deal Chinese aluminum-maker Aluminum Corp. of China, or Chinalco, is getting from its banks on $21 billion in financing for a proposed $19.5 billion investment in Rio Tinto. An SEC filing released Monday shows that policy lender China Development Bank is leading a syndicated loan by four Chinese banks offering the cash at 90 basis points, or hundredths of a percentage point, above the six-month London interbank offered rate. With six-month Libor at just 1.75% these days, that means Chinalco is looking at payments starting at 2.65%.

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