http://www.bloomberg.com/apps/news?pid=20601110&sid=a8.nKDumBnVI
The Chinese government has made it easier for its companies to take advantage of unprecedented low asset valuations by investing in commodities and corporations overseas. Chinese companies now only need to seek approval for overseas investments from local authorities, which is simpler and more streamlined to the previous approval process that went through the central government.
Overseas investment has already started to boom. Total overseas investment in 2008 was $52.2 billion, more than double the 2007 figure. So far this year, $22 billion in investments were announced in January and $65 billion in February. A stable currency, cheap valuations and indebted foreign companies have created the perfect opportunity for cash rich Chinese companies.
My Opinion: Outbound investment is on track to be higher than inbound FDI for the first time in China’s history this year. I previously mentioned Chinese companies would take this track to expand their profit and product distribution channels. With commodity prices so low, Chinese companies have gone on a buying spree in Australia, picking up stakes in OZ Minerals, Fortescue Metals Group and Rio Tinto. I expect this to expand into other strategically important industries with low valuations.
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{ 3 comments… read them below or add one }
Hello Larry
I would be very interested to hear your comments on this. Personally it freaked me out.
Merv
http://www.youtube.com/watch?v=eAaQNACwaLw&feature=email
Larry Edelson Reply:
March 25th, 2009 at 12:20 pm
I don’t give much credence to those kinds of things. They’re amusing, but often nothing more than that.
Hi Larry
Do you see this as having a positive impact in Australia? It is very confusing here. We get all this bad news and yet the evidence just from observing people in our local shopping mall seems to suggest that there are a lot of people buying still and the coffee shops are packed. However we do live in Queensland and mining and agriculture are the major exports. Maybe that helps?
Larry Edelson Reply:
April 14th, 2009 at 1:24 pm
Yes, I do. China has nearly $2 trillion in its kitty. So as it spreads it around, it’s very likely to help resource-based economies, especially Australia.
Hi Larry
Looks like Rio Tinto was making a liar out of me even as I wrote! The 600 jobs cut from Rio Tinto Alcan in Gladstone and a further 100 at their bauxite mine in Weipa is estimated to result in total job losses of around 5000 for the region. I guess its a matter of time. Its just taking a little longer for these reductions in demand to flow through than we expected. The Australian government has been reluctant to allow large sales of mining and agriculture companies to China, however if they promise to maintain employment levels then it may be difficult for the government to deny them in future.
regards
Donna
Larry Edelson Reply:
April 20th, 2009 at 9:00 pm
Agreed!