"Going Out Strategy"

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.

This "going out strategy" is their slogan for buying up the world and diversifing away from U.S. dollar. Here is the amazing thing: China helps to finance our credit bubble, it bursts with a huge crash in asset values, and there is China taking advantage of cheap prices after the bubble bursts. China is doing "capitalism" better than we are!

Income Inquality + Financialization + Globalization = Destruction of Middle Class

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oh yeah

I've noted this also that China is clearly out to remove the U.S. dollar as a reserve currency, they are buying up commodities like mad, including oil (I hope more people read this one I wrote up on China buying up oil reserves around the globe), and also seemingly trying to do it so they don't get stuck with a lot of junk U.S. debt.

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We should be very concerned about this.

On many levels even national security. But it doesn't matter as long as MNC get what they want and China get what it wants the rest of us are screwed.

I am becoming very worried about this. One obvious way to prevent this is to move very quickly to energy independence. Energy independence should be our "World War" that brings us out of this "Great Recession".

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the point is

while you're right we sure should be as many others are saying, regardless, one ain't gonna stop oil being a strategically critical commodity any time soon.

Yeah, and this is almost completely under reported, as are most of China's latest moves.

Even when they have hearings on it....they don't even put up a video on CSPAN, never mind "advertise" it, you have to really dig into government resources to find reports!

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Next year - no. Ten years possibly.

But it is way past time to truly be on the path of energy independence. Brazil is energy independent. It took Brazil several decades but they did from scratch with American automakers producing flex-fuel vehicles.

We have the advantage that much of the technology has already been developed to use alternative fuels. It is a matter of making the jump.

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Brazil is energy independent

because of expanded oil production. In 1980, the country produced around 180,000 barrels of oil a day. By 2006, that had risen to round 1,700,000 barrels.

Brazilian ethanol production in 2006 was around 330,000 barrels daily.

It's crude oil that made Brazil energy independent, not ethanol.

Ethanol is a non-starter, it costs more in energy terms to produce than it puts out.

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I think you are misreading tea leaves

Oil is paid for in U.S. dollars (aka petro-dollars). As the value of the dollar decreases, oil costs increase - an inverse relationship.
Ergo, if the U.S. dollar is devalued in order to monetize debt, oil is a hedge.

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no tea leaves

this is actual reserves, physical commodity acquisition, real supply vs. petrodollars vs. Euros, etc. China is making deals all over the globe on actual physical supply.

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Only applies to market price

What you say is only applicable once that oil goes on the world market, or any monies put towards futures, etc.

When it is gobbled up wholesale, or moved as part of the oil/energy black market, the petrodollar rule does not apply.

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Wrote about the Going Out Strategy

...today. It's a good move for China. Their portfolio is a little lopsided in USD ;-) Their moving quite firmly these days, getting themselves positioned, and I think their currency swap trade policy will be good for the stability of the global marketplace. Not only are they now GM's largest auto customer, but they're making some very farsighted moves in the energy and environment sectors:

China considers environmental tax

A new unified environmental tax is possible but legislators remain divided over how to introduce it. Although the idea of reforming the system by which polluters are taxed was first proposed two years ago, it was fast-tracked in May, along with changes to resource and property tax, by the National Development and Reform Commission in its state-council-approved plan for deepening economic reforms.

The green answer is wind and sun

In China there are reports of another goverrnment financial stimulus around the corner. Aimed exclusively at boosting the country’s renewable energy sector, it is variously said to be worth between $440 billion and $660 billion. The sheer amounts involved, say analysts, suggest that Beijing is thinking seriously about how to make the switch from being the world’s all-purpose (and rather dirty) factory, to becoming a global hub for clean technologies.

CNOOC, Sinopec to partner on Angolan oil deal

CNOOC and Sinopec plan to buy a 20% stake in an Angolan oilfield from American energy firm Marathon Oil for US$1.3 billion through a 50-50 joint venture, the Financial Times reported. The deal is the latest in a string of energy and resource investments by Chinese firms; in late June, Sinopec announced that it would buy Toronto- and London-listed Addax Petroleum.

China launches major solar subsidy

China launched a plan to offer significant subsidies to independent solar power projects, Reuters reported. The move is aimed at boosting the country's solar energy sector and could draw more than US$10 billion in private funding, putting China on track to become a leading market for solar equipment in the next couple of years.

The sun is probably setting on the US -- after all, we did contaminate the entire world market with our nasty paper and fake ratings. There's a price to pay for that. We aren't just going to get away with it. And our ugly little wars permanently damaged US good will years ago.

As for the petrodollar, does anyone still use dollars to buy oil? I heard the Saudis were no longer accepting dollars after the first of next year.

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please share with the rest of the class

if you're saying you wrote a blog post elsewhere, just change the title, little of the first few sentences, etc. and cross post on EP, we have a lot of readers very involved in trade, manufacturing, so they love posts on China, if you're looking at those details, well cited research, they appreciate it.

Did you know China has engineers on their team of economic strategists?

Do you know the U.S. doesn't have an economic strategy team, based on the national interest?

(economic advisers are not long term strategic planning)

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