Recently there has been a spate of headlines that suggest that the Chinese continue to show a high degree of investment interest in resources. Here are just a few examples:
- China invests $16b in Venezuelan oil fields
- Survey shows Canada to be of great interest to Chinese investors (for its energy and natural resources, agri-food and biotech sectors)
- China buying gold from domestic producers
These stories are anecdotal and suggest that China understands that she is commodity short and is trying to gain long-term control of supply. But stories don’t tell the whole picture. Analysis from the Center for Geoeconomic Studies gives us a better picture of China’s external investment weights: [click to enlarge]
This chart, along with their announced direct investments, seems a lot like the effects of a long-term investment policy that doesn’t change easily. Many of the announced investments are of the FDI (foreign direct investment) variety, which cannot be sold easily like a stock holding.
While there are some indications that China may be pulling back on their commodity demand in the short-term, don’t mistake tactical decisions with the long-term strategic picture.
As long as China is growing, it will mean a secular friendly environment for commodity bulls.