China on buying spree(gobbling up raw materials)

Business Day ^ | 05/14/09 | John Garnaut

[TigerLikesRooster]

China on buying spreeJohn Garnaut, Beijing

May 14, 2009

CHINA has shifted from merely the fastest-growing consumer to the biggest buyer by far of Australia’s key metals since the start of the financial crisis.

China set import records in April for copper, aluminium, zinc, nickel and iron ore, in each case beating the previous record, set in March.

The unprecedented Chinese buying spree, at a time when the rest of the world is shutting down, has caused metals analysts to dust off the belief that the Chinese economy can grow strongly without help from the United States.

"Decoupling is alive and well," Macquarie Bank’s chief of commodities analysis, Jim Lennon, told investors in Seoul yesterday.

But mixed Chinese economic data yesterday raised new questions about how much of the Chinese buying is sustainable.

[TigerLikesRooster]

China is stocking up its strategic reserve. Prices are relatively low now. Besides, who knows what geopolitical conflicts break out, disrupting supplies and causing prices to soar.

[TigerLikesRooster]

Ping!

[allmost]

Something to watch. China has never ‘played fair’. Dictators don't tend to concern themselves with such minor things.

[ModelBreaker]

I think it’s much simpler than strategic reserves. This is government purchasing. They have oodles of dollars. If you had to choose between keeping those dollars and buying copper, which would you choose?

The Chinese are going to get clobbered by this administration’s promiscuous borrowing when inflation hits. This is a net unloading of dollars to minimize the hit, imho. Effectively, they are speculating in commodities and I think they are making the right bet.

Of course, us peasants here in the US are going to get clobbered too. Only our political class will do well and prosper over the next several years.

[TigerLikesRooster]

Geopolitics and economy are all and the same for Chinese. Of course, they won't play fair.

[Tzimisce]

My guess: they’re building weapons.

[The Truth Will Make You Free]

Better to own raw materials than dollars.

[allmost]

Bump to #4. It’s a commodities play. It is unfortunately also a Dollar play. No better time than now for them to do it.

[TigerLikesRooster]

I suppose there is not enough gold in the world they want to convert dollar reserve into. Economic value of raw materials depreciate much slower than dollars under current economic climate.

China also cannot produce enough raw materials to meet the demand of their industry. It is a big importer of raw materials. Stocking enough reserve helps.

[Obadiah]

Musical chairs, only this time with dollars. The last one holding dollars loses. China is dumping dollars. Why do you think Obama suddenly fessed up yesterday regarding the trillions of dolars of debt Democrats have now saddled us with?

[ModelBreaker]

“I suppose there is not enough gold in the world they want to convert dollar reserve into. Economic value of raw materials depreciate much slower than dollars under current economic climate.
China also cannot produce enough raw materials to meet the demand of their industry. It is a big importer of raw materials. Stocking enough reserve helps.”

Actually, the value increases quickly in an inflationary environment because the materials have an inherent value independent of money. So overstocking the larders with commoditites now and buying them with a strong dollar now lets them lose dollars (depreciating assets here real soon now) and pick up useful appreciating assets.

It’s a no-brainer after what happened to the Saudi’s and teh Japanese when they lent the US a bunch of money.

[TigerLikesRooster]

I was talking about what physical degradation will do to economic value of raw materials. However, dollars depreciate much faster, or collapse.

[DiogenesLaertius]

I’ll give this to the Chinese government.

Their policies think things out much farther ahead than our myopic group of morons in Washington.

I, myself, am pursuing a similar course of action. Let the other idiotic millenials reap the consequences of their laziness and ignorance in voting for the messiah.

[Southack]

"China set import records in April for copper, aluminium, zinc, nickel and iron ore..."

True, but the sum of *all* Chinese imports was down even though they imported more metal.

Gross Chinese imports were down by 22% in that same timeframe.

The metal buying was the spending of their Stimulus Package.

Their exports of finished products are down, as are their orders for the coming months, however, so they are going to be using that metal for a long time to come.

[TigerLikesRooster]

Those iPod/blackberry-huggers, going about their political leader as if he were a celebrity. They makes up the giant group of groupies. I first saw this insane phenomenon in S. Korea five years ago, when they elected an incompetent misfit called Roh Moo-hyun, who is now crashing and burning badly amid bribery scandal. He had a fan club, Nosamo, which acts exactly like Obama groupies. Those moron in U.S. will similarly get a rude wake-up call.

[nathanbedford]

Only our political class will do well and prosper over the next several years.

There is a lot of good sense in your post and it is this last sentence which prompts me to reply. If you believe, and I think you do, that Obama is trying to change the game, not just the rules of the game but the game itself, the only people who can prosper in his new game are those in the political class.

I believe he is trying to dismantle the system for the creation and distribution of resources which we currently enjoy in a relatively free market and contrive a system in which political will is substituted for the invisible hand. That does not necessarily mean that the political will will be an exercise in democracy. To the contrary, it will be an exercise in elitism. The elitists will allocate precious assets of capital and labor to create resources and divide those resources according to the shibboliths of the elites who happen then to be in power. Look for resources to be distributed at first according to race, class, gender, political affiliation, sexual preference etc. later, look for cronyism.

The inflation which you foresee will not be unwelcome by those who share this mindset because there will regard it as a tool to further the deconstruction of the capitalist system. They do not fear it because they intend to junk the system which inflation or deflation reflects. To the degree that our currency is used by individuals voting with their wallets to allocate resources, inflation distorts that process and makes it too murky and too attenuated for people to intelligently vote. This is true of a housewife deciding which pair of sneakers to buy for the kids as it is for a multinational CFO deciding whether to forward purchase raw materials.

Good post.

[Son House]

Effectively, they are speculating in commodities

Didn’t they also stop buying US debt? Hillary?

[Daisyjane69]

Smart people, smart policy.

Maybe we can kidnap a few of them and run them as Republicans in the Senate or House next time.

[familyop]

"Of course, us peasants here in the US are going to get clobbered too. Only our political class will do well and prosper over the next several years."

That's true. But the more they spend, the sooner that trend will run into a difficulty: likely default. Granted, our leaders might make a play to sink the dollar much more radically (e.g., to 1/10th) in order to repay debt more cheaply. Either way or something in between, eventually, we'll regain respect for some of the principles of our great-grandfathers, IMO.

[JimRed]

Two words: war materials.