Friday, October 9, 2009

China Sells Dollars-5

"China's sovereign-wealth fund is fast becoming a major backer of natural-resource companies world-wide, as the $300 billion fund seeks to buy into a global rebound. ... CIC's willingness to dole out cash contrasts with other sovereign-wealth funds, for example those in the Middle East [ME] and Singapore, which remain cautious after having seen their portfolios hurt in the financial crisis. ... CIC's resource plays dovetail with China's long-term strategic interest in securing access to natural resources. Chinese officials have pushed state-owned firms to buy overseas mining and oil assets this year as commodity prices dropped. ... This spate of activity signals renewed confidence at CIC, which endured criticism over poor timing on its high-profile purchase of stakes in Blackstone Group LP and Morgan Stanley in 2007", Rick Carew and Tom Wright at the WSJ, 24 September 2009, link:

Disagreeing with Carew & Wright, CIC's actions do not contrast with those of ME sovereign wealth funds. CIC just sees dollars as riskier than commodity-based investments and the ME sovereign wealth funds disagree as to where the risks lie.


Anonymous said...

China and the middle easterners have soverign wealth funds and we have Goldman and Citi... we are second tier anglo-saxon players...

It's interesting to see the resistance and acceptance of our bigbanks in other nations like China and India. HSBC is allowed onto the Shanghai exchange... but our global behemoths? Nada... the doors are shut to our toxic debt pipeline. As they should be. We will have to deal with our garbage at home.

Mike said...

I think China is going to continue slowly but surely diversifying out of dollars because of our government's money printing habits. I recently came across a good article at titled "Gold Price Up, Dollar Down – Does it Really Matter?", which discusses the Federal Reserve's role in debasing our currency, and the relationship between the dollar and the gold price. It goes on to describe how the Fed has implemented easy monetary policies to avert deflation, and analyzes the potential investment implications for fiat currencies, the gold price, and gold mining companies due to all the money printing by world central banks. There are many serious unintended consequences of such huge amounts of government spending, and I think this has the potential to cause even further damage to fiat currencies.