This article says it all. Our financial geniuses think they are so smart, but we are way behind the curve. All of those foreigners who go to Harvard, MIT, Berkeley, Stanford and all the other elite institutions here pay attention. They are able to assimilate not only how the US thinks, but they are very good at formulating Long Term National Strategies maximizing their positions. On the other hand, our best and brightest just seem to be learning how to get rich in the short term. Unfortunately, the end game indicates that we will all be Chinese one day.
China's State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons.
Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can."China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years. "The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.
The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).
While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.
John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. "We're very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China's pockets are deep."Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor", floated by John Maynard Keynes at Bretton Woods in 1944. The Bancor was to be anchored on 30 commodities - a broader base than the Gold Standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees.
If his thoughts reflect Communist Party thinking, it would explain the bizarre moves in commodity markets over recent weeks. Copper prices have surged 49pc this year to $4,925 a tonne despite estimates by the CRU copper group that world demand will fall 15pc to 20pc this year as construction wilts.
Analysts say "short covering" by funds betting on price falls has played a role. But the jump is largely due to Chinese imports, which reached a record 329,000 tonnes in February, and a further 375,000 tonnes in March. Chinese industrial demand cannot explain this. China has been badly hit by global recession. Its exports - almost half GDP - fell 17pc in March.
While Beijing's fiscal stimulus package and credit expansion has helped lift demand, China faces a property downturn of its own. One government adviser warned this week that house prices could fall 50pc.
One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said.
This is slightly disingenuous. China has the world's largest reserves - $1.95 trillion, mostly in dollars - because it has been holding down the yuan to boost exports. This mercantilist strategy has reached its limits.
The beauty of recycling China's surplus into metals instead of US bonds is that it kills so many birds with one stone: it stops the yuan rising, without provoking complaints of currency manipulation by Washington; metals are easily stored in warehouses, unlike oil; the holdings are likely to rise in value over time since the earth's crust is gradually depleting its accessible ores. Above all, such a policy safeguards China's industrial revolution, while the West may one day face a supply crisis.
Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1pc, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a "Copper Standard" as a "Gold Standard".
Even if we get through this financial crisis, any recovery that might occur is going to be severely restricted by a commodities squeeze. China is staking out a hedge position against the monetizing of the US debt that they hold in Treasuries.
they are very smart
and more interesting, they have engineers on that 20 person panel crafting national economy strategy.
The U.S. on the other hand, has just been giving it away to China.
Told you they were a hedge fund
Beijing is diversifying away from US treasuries is a long time coming. If I were China holding on to that much paper, I would be thinking of ways too. Saying that, the bulk of these purchases are to stimulate internal demand through things like more urbanization. The Chinese are facing a big problem, and that is they have too much capacity which brings about the specter of deflation. At the same time, they are also coming off an asset bubble of sorts. I've written how there are really many economics rolled up into one in China.
I still don't see how we'll all be Chinese one day reading this. The Chinese have other priorities than wanting to annex the US. I remember the same talk, same words, almost same everything, only it was the Chinese, it was the Japanese. Anyone remembered the shaking hands and the uproar when they purchased that golf course or when Mitsubishi purchased Rockefeller Center? Saying this, it wouldn't hurt you to know Mandarin.
But remember this, we live in this thing called globalization, and one of it's main pillars is cost arbitrage. China grows because they can make it cheaper and export it for a profit, the underpinning of this is near-slave waged labor and lax regulations. But this is a game that really anyone can play so long as they are willing to pay the price, that being the discarding of paying relatively high wages (or living standards?). There is nothing to stop India from copying China in this regard, and in fact they are already starting. India has or will have more people than China, and a relatively younger one at that. The folks both in Beijing and New Delhi knows this, and they know that the folks that open up factories and services firms know this. China neglected fostering a real domestic consumer like we neglected our infrastructure.
But does this make us future slaves of China? You know, ironically enough today I was talking to a friend about this very subject. She's a history professor, mainly Latin American, and she feared that China will do to us one day what France did to Mexico when it stopped paying interest on debt it owed to Napoleon's regime. "You know" she goes" if we default, they'll take Alaska!"
There isn't to say we won't default, it is within the realm of possibilities. But grabbing land won't jive these days, the costs would be too high. The Chinese, like I said previously, really have other priorities at this point. We're 'down here' their list, while keeping the regime in power is 'up here'. But let me ask you all this, would it really be that bad in the long term, if China stopped buying our debt? Wouldn't this force us to finally do what was needed? Yes the pain would be great, in fact in the short-to-medium term I would say things would be horrible in this country. But we need to break this financial heroin addiction that we have.
This explains why my wife's
This explains why my wife's cousin in China has been getting rich buying e-scrap from the U.S.