26 June, 2005

how would you spend $700 billion?

If I had a few hundred billion lying around, I’d waste substantial sums and I wouldn’t be too concerned about price. China is sitting on close to $700 billion in foreign exchange reserves, produced because neither imports nor investment outflows have been sufficient to soak up forex inflows. Barron’s in the earlier-noted item, looks how some of those fat stacks of cash are now being used:

Chances of getting a bargain buying an oil company after a rise of over 60% in crude prices over the past year doesn’t strike us as quite as good as the average sucker’s chances of hitting the lottery, whether the buyer is Chevron or Cnooc. Which merely enhances the likelihood that a Chinese acquisition binge in the U.S. will end on the same sobering note for the big Sino spenders as the Japanese buying binge did for the feckless acquisitors from the Land of the Rising Sun. Nowhere is it written that the Chinese have a better eye for value than the Japanese.
We do sympathize with the Chinese. They’re sitting on close to $691 billion in foreign-exchange reserves, not a little of it resting in U.S. Treasuries. Buying something, anything, American with that mountain of money is a heck of lot better than building another steel mill or pouring yuan down a rat hole in an effort to prop up a sinking stock market.


by @ 10:10 am. Filed under Japan, China, Money, Asia, East Asia, Economy, Northeast Asia

the coming collapse… (iii)

Barron’s has a great item looking at the apparent recent rise in overseas accquisition activities by Chinese companies. I’ll post something separate on that later, for now, here’s a paragraph that caught my attention. (via Howard French):

So far, in any case, the Chinese economy appears quite reluctant to cooperate with even the mildest efforts to cool it off. Industrial production was up a sizzling 16.6% in May over the same month last year, fixed investment has been running upwards of 25% ahead of last year, oil demand continues to spurt and China has its very own, swiftly growing and very large real-estate bubble. A tendency to operate at least part of its industrial plant so that social stability tops profits as the bottom line obviously serves to camouflage weaknesses, but only for so long.
Our own feeling is that the regime’s ambivalence and equivocation about stepping on the brakes in earnest make China’s mother-of-all-booms almost a sure thing to became a big, fat bust, possibly some time next year. We won’t even hazard a guess as to the size and severity of the fallout, except it’ll be huge and it’ll be global.

by @ 9:20 am. Filed under China, Money, Asia, East Asia, Economy, Coming collapse, Northeast Asia

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