Laiwu Steel Corp said China's government hasn't rejected Arcelor SA's plan to buy a 38 percent stake in the nation's eighth-largest steelmaker and is still reviewing the proposal, the Bloomberg News reported.

The proposal is being considered under the "normal approving procedure" by state authorities, Laiwu Steel said in a statement yesterday. The government rejected Arcelor's plan to buy the stake in August, the Economic Observer reported on September 16.

Shares of Shandong province-based Laiwu Steel have risen 11 percent since Arcelor, which is being acquired by Mittal Steel Co, made the proposal in February. China will boost scrutiny of foreign acquisitions and ban the sale of assets that "threaten China's economic safety," the government said in August.

"It may become more difficult for foreign acquisitions in the key industries" such as steel and equipment making, said Lu Yizhen, head of research with Citic-Prudential Fund Management Co.

Shares of Laiwu Steel were suspended from trading yesterday. The stock fell 1.1 percent to 6.13 yuan (77 US cents) on the Shanghai Stock Exchange on Tuesday.

Overseas steelmakers' plans to buy Chinese rivals are facing regulatory obstacles after Mittal agreed in June to buy Arcelor to create the world's biggest steelmaker, the Economic Observer reported, citing unidentified officials at the National Development and Reform Commission, the nation's top economic planning agency.

Meng Lingjun, deputy director of the commission's Metallurgy division, didn't return calls seeking comment. Chen Bo, media manager for Arcelor in China, declined to comment.

China, which produces and consumes a third of the world's steel, "in principle" bans overseas producers from taking controlling stakes in Chinese steelmakers.

Arcelor agreed to buy the stake in Laiwu Steel for 2.1 billion yuan from the company's parent Laiwu Steel Group, Luxembourg-based Arcelor said on February 24.

Mittal, Arcelor and South Korea's Posco are competing to expand in China at a time when the world's biggest producer of the alloy aims to merge its 260 steelmakers and create globally competitive mills.

Editor: Yan