It's not a foregone conclusion that China will swoop in with a counter-offer to BHP Billiton's $38.6-billion US hostile bid for Saskatchewan fertilizer powerhouse Potash Corp., says a China expert.

"Let's not overplay this whole thing," said Wenran Jiang, a professor with the University of Alberta's China Institute.

"The potential of the Chinese stepping in could be as complicated, if not more complicated, than the BHP situation."

A Potash Corp. mine in Rocanville, Sask., shown in 2007. The company has dismissed BHP Billiton's $38.6-billion US hostile bid and is trying to cobble together a leveraged buyout possibly involving Chinese backers. (Troy Fleece/Canadian Press)

Potash Corp. has unequivocally dismissed BHP's $130-per-share offer as too low and has reportedly been trying to cobble together a leveraged buyout.

Participants in such a deal would include Chinese backers, other North American fertilizer producers or pension funds.

A report in a Chinese business magazine this week said the country's state-owned chemical concern, Sinochem, is seeking government support to launch a competing bid. However, a Sinochem official also said such a deal might be "too big and not worthwhile."

"The Chinese are debating themselves," said Jiang, who added that many observers are treating China as though it's one "monolithic bloc," as opposed to a complex country with many divergent interests.

Sinochem is the parent company of Sinofert, China's largest fertilizer company. Sinochem alone does not have the wherewithal to launch a counter-bid, so it would need to piece together a consortium to make such a move work.

Bid, if any, will take time

Considering it took years for BHP to line up bank financing and establish its own presence in Saskatchewan, a Chinese-led consortium is not likely to materialize any time soon, Jiang said.

"It's not going to be done in a weekend, or a few weekends," he said. "We're talking about quite an effort. Somebody has to have a very determined mindset, saying this has to be done."

And while China may be concerned about what a BHP takeover would mean for global potash markets, it may decide that the outcome wouldn't be much different from its current situation.

The three largest potash producers, Potash Corp., Mosaic Co. and Agrium Inc., market their product abroad together through an agency they jointly own called Canpotex.

All roads lead to monopoly of sorts

China may conclude it would be dealing with a monopoly of sorts either way, and that it's therefore not worth its while to enter the fray.

"The incentive to intervene may vary depending on their perceived outcome of this deal," Jiang said.

"The Chinese are looking at the whole thing from more of a detached perspective than the Canadians."

China also is also analyzing what the market outlook for potash will be several years into the future. It may consider the possibility of new sources coming on in Africa or elsewhere. It may also weigh how more efficient farming practices will affect domestic fertilizer demand.

"The perception that the Chinese would do anything to lock up resources for its own supply security is not quite accurate," Jiang said.

"It's not like this is the deal China must grab, otherwise they will lose everything."