- 19 Apr 2009 18:23
#1878447
China Inc raises the stakes
$110bn fund to join foreign buying spree
Michael Sainsbury
The Australian
CHINA'S government-controlled national pension fund will embark on a multi-billion-dollar international buying spree, taking advantage of cheaper asset prices to give the country an even larger stake in Western corporations.
The $US80 billion ($110 billion) national social security fund, which collects pension contributions and the proceeds of state assets, signalled on the weekend it would explore further investments offshore, joining China's $200 billion sovereign wealth fund and its major operational investor CITIC in hunting for stakes in global companies.
The fund's announcement provides further evidence that China will emerge from the global downturn as a much larger player on the international corporate scene, with strategic investments underwritten by the country's big four commercial banks, business lender China Development Bank and government-policy bank Export Import Bank.
Speaking at the Boao Asia Forum business and government summit on the global crisis at the weekend, China's banking regulator Liu Mingkang encouraged Chinese banks to build global businesses but to exercise caution.
The strategy increases the challenges for the Rudd Government, which has yet to develop a clear position on the rush of Chinese investment pouring into mining companies, and is still to make a decision on the bid by Chinalco for a stake in Rio Tinto.
Australian officials have told The Australian they believe the level of public and political debate about the relationship with China is poor and should be more focused on where both countries will be over the next two decades.
Australia's mining companies are at the head of the queue for Chinese funds. Andrew Forrest's Fortescue Metals Group has started talks with Chinese banks and other financiers, including the country's $US200 billion sovereign wealth fund.
Fortescue will need extra capital if it is to expand production beyond 80 million tonnes. An FMG spokesman said meetings had taken place with a number of Chinese financiers over the weekend at the Boao forum, including China Investment Corporation.
As part of its $US19.5 billion deal to sell shares and stakes in key assets to Chinalco, Rio Tinto has been offered a line of credit worth up to $20 billion from Export Import Bank, China's only remaining policy bank that is directed by the Government.
The Australian understands a number of Chinese banks have held discussions with state and federal authorities in recent months about starting operations in Australia.
The International Commercial Bank of China last week confirmed its position as the world's biggest bank, with the Construction Bank of China at No2 and Bank of China at No4. Having been recapitalised after the 1997-98 Asian financial crisis and listed on the Hong Kong stock market over the past few years, the banks have avoided the toxic assets that have poisoned the Western banking system.
Despite a fall in China's GDP growth to an annualised 6.1 per cent last week -- its lowest growth rate since records began in 1992 -- the country's leaders have been convinced by better underlying March economic data that their 4 trillion yuan ($8 billion) stimulus package is beginning to counter the dramatic slump in exports that triggered business closures and tens of millions of job losses in coastal areas.
The vice-chairman of the Chinese Government's economic think tank, Zheng Pinli, said China's economy had touched bottom and economic growth might recover this quarter to about 7 per cent. The Government might need to boosts its investments to meet its 8 per cent target for this year, Mr Zheng said.
China is shocked at how bad the economic situation continues to be in the rest of the world.
Chinese Premier Wen Jiabao said: ``We must be sober and prepare for greater difficulties over a longer period of time. The deterioration of world economies is worse than expected, and a global recovery may be a long and winding road.''
Mr Liu was at pains to scotch growing talk last week that China might face a bad-loans situation.
``I'm being responsible when I say we will continue to see declines in both the outstanding bad loans and the ratio of non-performing loans,'' Mr Liu said.
China used the conference to step up the pressure on its biggest debtor, the US. China holds the vast majority of its $2 trillion in reserves in US currency or Treasury bonds, and its leaders remain furious with Washington for mismanaging its economy and what they describe as printing money.
[Retrieved from Factiva]
As expected, China is taking advantage of its enormous dollar reserve to buy cheap asserts. To what extent this is going to tip the global economic balance in favor of China is difficult to assess though. In any case, this also has the side effect of encouraging anti-Chinese rhetoric such as here in Australia when the government blocked an investment deal by a Chinese state-owned investment/energy company.
It's also interesting to see China has gradually shifted from a capital importer to a capital exporter. This would likely help shape China's foreign policy orientation - making it a more assertive and expansionary one e.g. already China is building up its navy force to protect its increasingly global interests. Perhaps a new global imperialist power in the making?
$110bn fund to join foreign buying spree
Michael Sainsbury
The Australian
CHINA'S government-controlled national pension fund will embark on a multi-billion-dollar international buying spree, taking advantage of cheaper asset prices to give the country an even larger stake in Western corporations.
The $US80 billion ($110 billion) national social security fund, which collects pension contributions and the proceeds of state assets, signalled on the weekend it would explore further investments offshore, joining China's $200 billion sovereign wealth fund and its major operational investor CITIC in hunting for stakes in global companies.
The fund's announcement provides further evidence that China will emerge from the global downturn as a much larger player on the international corporate scene, with strategic investments underwritten by the country's big four commercial banks, business lender China Development Bank and government-policy bank Export Import Bank.
Speaking at the Boao Asia Forum business and government summit on the global crisis at the weekend, China's banking regulator Liu Mingkang encouraged Chinese banks to build global businesses but to exercise caution.
The strategy increases the challenges for the Rudd Government, which has yet to develop a clear position on the rush of Chinese investment pouring into mining companies, and is still to make a decision on the bid by Chinalco for a stake in Rio Tinto.
Australian officials have told The Australian they believe the level of public and political debate about the relationship with China is poor and should be more focused on where both countries will be over the next two decades.
Australia's mining companies are at the head of the queue for Chinese funds. Andrew Forrest's Fortescue Metals Group has started talks with Chinese banks and other financiers, including the country's $US200 billion sovereign wealth fund.
Fortescue will need extra capital if it is to expand production beyond 80 million tonnes. An FMG spokesman said meetings had taken place with a number of Chinese financiers over the weekend at the Boao forum, including China Investment Corporation.
As part of its $US19.5 billion deal to sell shares and stakes in key assets to Chinalco, Rio Tinto has been offered a line of credit worth up to $20 billion from Export Import Bank, China's only remaining policy bank that is directed by the Government.
The Australian understands a number of Chinese banks have held discussions with state and federal authorities in recent months about starting operations in Australia.
The International Commercial Bank of China last week confirmed its position as the world's biggest bank, with the Construction Bank of China at No2 and Bank of China at No4. Having been recapitalised after the 1997-98 Asian financial crisis and listed on the Hong Kong stock market over the past few years, the banks have avoided the toxic assets that have poisoned the Western banking system.
Despite a fall in China's GDP growth to an annualised 6.1 per cent last week -- its lowest growth rate since records began in 1992 -- the country's leaders have been convinced by better underlying March economic data that their 4 trillion yuan ($8 billion) stimulus package is beginning to counter the dramatic slump in exports that triggered business closures and tens of millions of job losses in coastal areas.
The vice-chairman of the Chinese Government's economic think tank, Zheng Pinli, said China's economy had touched bottom and economic growth might recover this quarter to about 7 per cent. The Government might need to boosts its investments to meet its 8 per cent target for this year, Mr Zheng said.
China is shocked at how bad the economic situation continues to be in the rest of the world.
Chinese Premier Wen Jiabao said: ``We must be sober and prepare for greater difficulties over a longer period of time. The deterioration of world economies is worse than expected, and a global recovery may be a long and winding road.''
Mr Liu was at pains to scotch growing talk last week that China might face a bad-loans situation.
``I'm being responsible when I say we will continue to see declines in both the outstanding bad loans and the ratio of non-performing loans,'' Mr Liu said.
China used the conference to step up the pressure on its biggest debtor, the US. China holds the vast majority of its $2 trillion in reserves in US currency or Treasury bonds, and its leaders remain furious with Washington for mismanaging its economy and what they describe as printing money.
[Retrieved from Factiva]
As expected, China is taking advantage of its enormous dollar reserve to buy cheap asserts. To what extent this is going to tip the global economic balance in favor of China is difficult to assess though. In any case, this also has the side effect of encouraging anti-Chinese rhetoric such as here in Australia when the government blocked an investment deal by a Chinese state-owned investment/energy company.
It's also interesting to see China has gradually shifted from a capital importer to a capital exporter. This would likely help shape China's foreign policy orientation - making it a more assertive and expansionary one e.g. already China is building up its navy force to protect its increasingly global interests. Perhaps a new global imperialist power in the making?
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