Remember the name Lou Jiwei. He could be the Warren Buffett/Vladimir Putin of China. Mr. Lou is the man who could soon be in charge of investing China’s huge U.S. $1 trillion foreign exchange war chest. Think of it like a giant, state-sponsored Pirate Equity or Hedge Fund, but interested in real, tangible assets. You know, like coal mines, gold mines, and oil and gas fields.
China has not yet gone on the global spending-spree we predicted a few years ago with its huge forex reserves. Instead, the country has invested billions in developing a domestic resource industry, building mines, rail heads, and ports by the score, and increasing its capacity to produce aluminium, steel, and copper.
There is only one little catch to this strategy: You can dig a gold mine anywhere you want, but it helps if you dig it where the gold is. China has spent billions in Africa securing resource deposits. In this sense, it is “following the geology” and bringing its checkbook with it. Australia may be interested in increasing productivity per worker. China may be interested in acquiring Australian assets. Both stories will be interesting to watch.
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