IF "CHINA Inc" was a person then it would probably be Xiao Yaqing, the former president of Chinalco who is also an alternate member of the Communist Party's Central Committee. Xiao twice mustered the resources of the Chinese state to buy into Rio Tinto and disrupt BHP Billiton's empire-building ambitions. For his efforts he was rewarded with a plum job as deputy secretary- general to the State Council.

But China Inc is less coherent, less sinister and far less effective than often imagined. Here's the background story of how Mr Xiao kicked a home goal by convincing his superiors to accumulate "strategic" metals reserves.

In November, after commodities prices had collapsed, Mr Xiao requested and received an urgent meeting with Premier Wen Jiabao, according to sources close to Chinalco. Mr Xiao told the Premier that the whole aluminium industry was in crisis. Chinalco and every other major aluminium company was losing money and hundreds of thousands of jobs would be lost if the state did not step in and soak up excess production.

Mr Wen briefed the State Council — China's cabinet — and spoke in favour of a rescue plan. The State Council agreed and instructed the State Reserve Bureau to buy up aluminium in particular and other metals, including copper, zinc, nickel, tin and titanium, as part of a diversified metals industry rescue plan.

Steel was initially included in the list but later excluded as the metal takes up a lot of storage space and tends to rust.

Officials at the bureau and the institution in which it is housed, the National Development and Reform Commission, thought the Xiao Yaqing-Wen Jiabao policy was a mistake from the start.

Nevertheless, the bureau duly purchased 300,000 tonnes of aluminium in late December and another 290,000 tonnes in February.

Chalco, Chinalco's listed subsidiary, was the most obvious beneficiary.

It accounts for a quarter of Chinese production but received nearly half of the stockpile orders.

Provincial governments followed the bureau's lead, with JPMorgan estimating they bought 880,000 tonnes of aluminium for stockpiling in the early months of this year.

The corporate sector also got involved, competing to accumulate inventories as prices rose.

Together, they brought forward a large proportion of China's expected total production this year, which is predicted to be about 12.5 million tonnes. Xiong Weiping, who replaced Mr Xiao as president of Chinalco and Chalco

in February, has publicly lamented that the period of loss-making prices did not last long enough to push high-cost producers out of business.

Metals expert Michael Komesaroff says China has 6 million tonnes of installed but idled capacity ready to fire up if and when prices revive.

The Chinese aluminium market remains hugely overcrowded and prices will be effectively capped for years to come, to the long-term detriment of Chinalco.

The second problem, as well as postponing a much-needed shake-out of the industry, was there was no guarantee that companies like Chalco that were contracted to supply the bureau actually did so from their own factories.

Instead, they bought from cheaper suppliers overseas and clipped the ticket on the way through.

The bureau's buying helped push the Shanghai aluminium price higher than the London price, inviting a flood of imports into China.

"For a few short months this year China flipped from being the world's biggest aluminium exporter to the biggest importer, which held a floor under prices when they might otherwise have collapsed," Mr Komesaroff says.

Some of the benefit went to China's aluminium producers.

Chinalco and Chalco posted smaller losses than they would have otherwise. But it was a particularly expensive way to achieve that goal.

Mostly, it amounted to an effective transfer of wealth from Beijing to international producers of bauxite, alumina and aluminium, of which Rio Tinto is the world's largest.

Ten days ago an enterprising magazine journalist gate-crashed a meeting between the NDRC and various bankers.

The official hosting the meeting was Yu Dongming, director of the NDRC's office of metallurgy and construction materials, who works closely with the bureau and Chinese metals producers.

Mr Yu candidly told the gathering: "The starting point for this policy was to ease the cash flow problem for manufacturers but, unexpectedly, agents became the biggest beneficiaries and manufacturers did not directly benefit.

"Under such circumstances, I don't think the state government will continue stockpiling."