Who? What? CIC stands for the Chinese Investment Corporation. CIC is a sovereign wealth fund for the Chinese Government that is buying up natural resources all over the world. Yesterday it was announced that CIC is buying a 15% interest in AES, an American based power generation company:
A CIC unit will buy 125.5 million in new shares for $12.60 each, or $1.58 billion, Arlington, Virginia-based AES said today in a statement. CIC will own about 15 percent of the power company. AES also signed a letter of intent to sell a 35 percent interest in its wind-power operations to CIC for $571 million.
The emphasis on that last sentence was mine. Of course AES executives are spinning this as a great thing for the company:
Fortune Magazine put out an interesting article earlier this week. I wanted to quote a piece of it so you can get the idea.
Oil in Nigeria (and the Congo and Brazil and Kazakhstan and ...). Natural gas in Iran. Iron ore in Australia. China's hunt for natural resources around the globe, which began in earnest earlier this decade, has intensified as never before.
In September alone, China's sovereign wealth fund, the China Investment Corp. (CIC), shelled out nearly $1 billion to buy an 11% stake in JSC KazMunaiGas Exploration Production, a Kazakhstan oil and gas company. Just a week earlier CIC paid $850 million to acquire 14.9% of Noble Group, the Hong Kong commodity-trading powerhouse. Earlier this summer the China Development Bank lent Petrobras, the Brazilian national oil company, $10 billion to help fund exploration in deep waters off Brazil.
Sometimes you wonder if Larry Summers is reading the blogs. The catch phrase Financial Balance of Terror has been coined by none other than 1990's Financial Terror Architect, Obama economic adviser Larry Summers!
President Barack Obama and fellow Group of 20 leaders are trying to end what Obama adviser Lawrence Summers has called the “financial balance of terror.”
World leaders, meeting in Pittsburgh last week, adopted a framework for more durable economic growth as they sought to prevent a replay of the worst crisis since the Great Depression. They also acknowledged the growing clout of China and other emerging economies by giving them a bigger voice in decision- making.
Because the United States showed just a little sign of life and challenged China's dumping of tires in yet another unfair trade practice, the main stream media screams absurdities.
What really happened? China was dumping tires to U.S. markets in order to destroy and capture yet another good by producing under cost, flooding the market to drive down prices temporarily and plain put U.S. tire makers out of business.
Leading economists have urged the United States to use concrete measures instead of empty words to ward off possible losses in China's holdings of US treasury bonds, which have already surpassed $800 billion.
The call comes amid widespread concern that US countermeasures to battle the financial crisis are creating another credit bubble and failing to regulate financial markets.
"So far the US government and the Federal Reserve have failed to provide China with any details of how its countermeasures against the financial crisis will not lead to serious capital losses to China's holding of its treasury bonds and foreign reserves," Yu Yongding, a renowned think tank economist with Chinese Academy of Social Sciences, told China Daily.
In past global slowdowns, the United States invariably led the way out, followed by Europe and the rest of the world. But for the first time, the catalyst is coming from China and the rest of Asia, where resurgent economies are helping the still-shaky West recover from the deepest recession since World War II.
While Roubini warns on oil price increases breaking any potential recovery, we note China's robust growth is causing oil prices to rise.
China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury.
China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June, said the BBC's Chris Hogg.
That's a little disturbing, but there's a really funny punchline to this story.
Does everyone remember Geithner's comedy act in June? In case you don't:
Speaking at Peking University, Mr Geithner said: "Chinese assets are very safe."
China Investment Corp. (CIC) plans to invest soon in U.S. taxpayer subsidized investment funds of toxic mortgage-backed securities, which it sees as a safer bet than buying into the Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF).
This is the name of China's new investment strategy. China has the largest foreign exchange reserves in the world at $2 trillion. It is all ready flexing it muscles and vast financial reserves buying up natural resources all over the world. Now, China's strategy has been clearly and explicitly stated by China's premier, Wen Jiabao:
“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,”
Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.
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