Looks like history could be repeating itself. Now we've known for some time that the Chinese were getting weary about buying and holding US-Dollar demominated government securities. They've been pairing back from the longer dated maturity paper to shorter ones.
Slowly but surely, they want to move away from American debt. All that money we've been shoveling their way, a byproduct to our trade imbalance, has gone into things showing their diversification plan, from farm lands in Africa to purchasing major steaks in mining firms to buying precious metals and oil. Now it seems, according to one Li Liangzhong, want to extend into further real estate purchases in the US.
- excerpt from "Chinese official urges buying of gold, U.S. land: report", 6/24/2009, Marketwatch
Now Mr. Liangzhong isn't just your average aparatchik in the Communist Party aparatus. He's the head of the party's economic think tank, and according to many like Jim Rogers, he has a lot of clout. A while back, Liangzhong was the first to echo a move into purchasing farmland wherever China could find it, Rogers always the keen opportunist started moving his funds into farmland. One can guess who he is aiming to sell that land to. Indeed, Liangzhong has a history of making similar advice into tangible assets, primarily US-based assets.
But there’s hope for deal makers trying to connect Chinese cash to the U.S. Word from Beijing indicates that Communist Party bureaucrats are still backing Chinese companies looking at the U.S. market. Li Lianzhong, a senior researcher at the Communist Party’s elite Central Policy Research Office, said Friday: “We should encourage Chinese enterprises to buy U.S. industrials and banks to achieve low-cost expansion.” He pointed to a weak U.S. dollar as an important reason to buy American now.
One key test of whether China is able to outbid rivals is General Electric’s sale of its appliance business. White-goods maker Haier Group of China is one of the top candidates in the deal, expected to fetch between $5 billion and $8 billion. Haier has made no secret of its ambitions to grow into the U.S., having lost out in the bidding for Maytag to Whirlpool a few years ago.
- excerpt from "China Still Hungry for the American Dream", WSJ.com, 9/2008
Then there's this one from Forbes magazine a bit back.
BEIJING (XFN-ASIA) - China should pursue overseas resources, including food, as a means of maintaining the value of its currency reserves, the South China Morning Post reported, citing Li Lianzhong, head of the economic bureau of the Communist Party of China Central Committee's Policy Research Center.
'You can maintain the value of the reserves by stockpiling natural resources, such as energy and iron ore, through purchasing mineral resources overseas or acquiring stakes in major oilfields. We should also find a way to turn those monetary reserves into food reserves, such as planting crops in other countries and sending the harvest back to China,' Li said.
- excerpt from "China must invest reserves in overseas resources, including food"
I remember almost 20 years ago, everyone talked about Japan replacing America. That the Japanese were going to own our country. The problem with the Japanese, that no one realized at the time, was that there growth was based on leverage (sound familiar?). The process was the same as we see it now, with one minor twist. Japan expanded industrially, selling us goods and using our money to invest. With all that cash coming in, it was used to establish more loans exponentially. Culturally, we couldn't take it, I remember the uproar when Rockefeller Center and Pebble Beach was sold to Japanese business concerns. Eventually, though, leverage caught up with them, and soon the party ended.
Japan though, unknowingly, had a pupil, China...well mainland China. Hong Kong and Taiwan had been at this for a while now, but the real sleeping giant was the PRC. It studied Japan and the others. Indeed, the Chinese, like their other asian counterparts, are excellent students. The Chinese love history, and thing longer term than even their economic rivals in Tokyo. They studied how we grew, how Japan grew, how Korea grew, how German and Europe grew after the war. But they also studied how we also faild. Like I said, there is a twist in the process. Now the process is repeating, but unlike the Japanese, the Chinese are intent on keeping their investments paid for by their mercantile trade system. The question begs, though, if they start buying up farm land here, what happens when we need the grain?