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Deflation, debt destruction, money printing, unserviceable debt and impossible unfunded liabilities. One hell of a mess. Keep some cash around, some hard assets, maybe even some stocks. Live within your means. Don't assume your bank will be open tomorrow. Don't assume there will be food on the... More
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  • China: 2 Trillion Dollars Looking for Commodities to Buy 5 comments
    Jul 21, 2009 8:07 PM
    China to deploy forex reserves

    From FT.com

    By Jamil Anderlini in Beijing

    Published: July 21 2009 19:09 | Last updated: July 21 2009 19:09

    Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.

    “We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday.

    Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.

    The “going out” strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.

    Qu Hongbin, chief China economist at HSBC, said: “This is the first time we have heard an official articulation of this policy ... to directly support corporations to buy offshore assets.”

    China’s outbound non-financial direct investment rose to $40.7bn last year from just $143m in 2002.

    Mr Wen did not elaborate on how much of the $2,132bn of reserves would be channelled to Chinese enterprises but Mr Qu said this was part of a strategy to reduce its reliance on the US dollar as a reserve currency.

    “This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.”

    State-owned groups, particularly in the oil and natural resources sectors, have stepped up their hunt for overseas companies and assets on sale because of the global crisis.

    China Investment Corp, the $200bn sovereign wealth fund, has been buying stakes in overseas resources companies and has taken a 1.1 per cent stake in Diageo, the British distiller.

    In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies.

    “Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”

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This post has 5 comments:

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  •  
    Yes go to places like Venezuela or Russia where they will seize your assets.
    21 Jul 2009, 08:13 PM Reply Like
  •  
    Yes, go to places like Venezuela or Russia where they will seize your assets.
    21 Jul 2009, 08:14 PM Reply Like
  •  
    First, the Chinese are smart. Second they're tough. Third, they're growing like crazy and everyone wants to do business with them. With the US, we're past our prime, stagnant, and deeply in debt. It's fashionable to screw with us.
    21 Jul 2009, 09:21 PM Reply Like
  •  
    When the Chinese start cashing up some of their US Bonds into cash to buy other companies, wouldn't that crash the Bond prices, and crash the US dollar ?
    22 Jul 2009, 05:19 AM Reply Like
  •  
    >>When the Chinese start cashing up some of their US Bonds into cash to buy other companies, wouldn't that crash the Bond prices, and crash the US dollar ? <<

    If they sold in a hurry, bond prices would go down quickly, most likely, and interest rates up. But I would think a more gradual way out of US Treasury debt would be to let the bonds mature, over time, and to shift their portfolio to shorter duration notes.
    22 Jul 2009, 06:30 AM Reply Like
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