BRIC+ News & comments

[Billy T]

By making more engines than vehicles, is that a vote of confidence in their engineering ??...

I am just guessing, but note that volume is more constraning than weight for ocean shipping. Thus, it is more profitable to ship compact, high-value / cubic meter things like motors than cars. Hence Fiat probably plans to make motors cheaply for export to put in cars made elsewhere. There is also the "economy of scale" factor - one big motor plant, even with shipping half of its production to other side of the world, is more economical than two of half the size.

BTW, while on cars, I just read a few minutes ago that not only is China now the largest market but GM's sale grew 38% there. A few days ago, probably in this thread, I noted GM sold more cars in Brazil in one month than ever before in its 78? year history in Brazil. It is not in the BRICs that the car sales are collapsing, but mainly in the USA.

 

[Billy T]

BRIC's GDP data and China's high speed trains:
"China ... has sustained an average economic growth of about 9.5% over the past 26 years. Its gross domestic product in 2007 was about $3.21 trillion, according to the World Bank. Russia's GDP was $1.29 trillion that year, Brazil's was at $1.31 trillion and India's at $1.18 trillion, according to the World Bank. ..."

From: http://www.forbes.com/2009/07/09/cu...nvesting-dollar.html?partner=daily_newsletter

That article discusses the possiblilty that the BRICs might form a currency union to replace dollar and concludes "not likely." but then goes on to state:

"... Even if the dollar isn't replaced by a BRIC currency, that doesn't mean that the dollar couldn't be swapped out for something else. By having the dollar as the world reserve, we have the luxury of borrowing in our own currency, Barbera says, adding that we can always print more dollars, while a country like Norway doesn't have the option of influencing the money supply. ..."

That comment about Norway (and even Brazil) may be technically true, but is illrelivent as they both can and do, sell bonds that promiss to repay in N.Kroners and Brazilian Real. Effectively "printing money" which foreigners will and do accept.
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"...China is revolutionizing its rail system, introducing high-speed trains and expanding its network of rails at an unprecedented pace. The world's most populated country plans to spend the equivalent of hundreds of billions of dollars and add 25,000 miles of track between now and 2020. The idea is to move people and goods in a transportation system that can fuel economic development without adding any more cars or trucks on the country's roads.
Five years from now China will have more high-speed passenger rail than all the rest of the world put together. ..."

From: http://www.forbes.com/2009/07/08/hi...p-stimulus.html?partner=globalnews_newsletter

{I might add that for about 4 years China has had in routine commercial operation the world's only non-experimental magnetically levitated train (to the airport from Shanghai, I think.) and have one that crosses such high mountains that passengers need oxygen masks!}

 

[Billy T]

"...China's foreign exchange reserves topped $2 trillion for
the first time sparked a broad rally in Asia, in a sign that investors
are rapidly returning to the region as evidence continues to emerge that
China's economy is weathering the recession better than the rest of
the world. The People's Bank of China, the nation's central bank,
announced that reserves grew by a record $178 billion in the second quarter,
and M2, the country's broadest measure of money supply, increased
at a record 28.5% pace in June. China's reserves now stand at nearly
double the size of Japan's..."

From: C.Schwab Morning Market View(TM)
July 15, 2009

 

[Billy T]

GM will invest 1 billion dollars in Brazil to introduce two new models -I just heard on local TV news. Recently I posted somewhere the news that GM had the best monthly sales in Brazil in its 84 years as a Brazilain company. Also total Brazilian cars/ light trucks sales in June were a record.

Mitsubishi of Japan just signed a three year contract with Cosan (largest maker of alcohol in Brazil) for delivery of 80 million liters/ year of alcohol. It will replace (or mix with? paper not clear) methonal to make ETBE (order may not be correct in English - it is the anti-knock / oxidizer additive to gasoline, I am almost sure)

China's conflict with Austrailia will help Brazil's iron ore sales, which are already the world's largest. China is already now Brazil's number one trading partner.

Recession? What is that?

It is like I forecast years ago: As US and EU sink into depression, Brazil will become an "economic colony" of Asia, especially of China. The collapse of Citi group will be anounced tomorrow - a big step towards that depression. Stocks will, I predict, give up most if not all of today's sharp gains.

 

[adam2314]

Aussie is having problems with China in regards to sales of iron ore.

So there is some agreement there Billy.

But !!.. ( there is always a BUT !!.. )

It is all part of global type negotiations .. In the mineral world.
Rio Tinto is well aware of this.

As one of the most ( if not the most ) indebted countries in the world per capita.

Our dollar ( NZ ) is holding up.

With a Tsunami of Uridashi money due to come up for repayment or roll over this month.

Why is it that these " Lenders " are re-investing into the NZ currency??

Madness is my first thought.

Your thoughts Billy. ??.

Oh !!.. You were well off being out of those wind farm shares )

 

[Billy T]

... As one of the most ( if not the most ) indebted countries in the world per capita. {Billy T insert: Your not counting the sheep heads, I assume. } Our dollar ( NZ ) is holding up.

With a Tsunami of Uridashi money due to come up for repayment or roll over this month. Why is it that these " Lenders " are re-investing into the NZ currency?? Madness is my first thought.

Your thoughts Billy. ?? ...

Not many of you so the debt to GDP is more important than the per capita debt ratio. - Why my joke about the sheep - You all are quite productively lot, I think. Hell, you must be the smallest population to ever win the America's Cup. (Possibly the current defenders, the Swiss, are about the same, but they have lots of money and that is what it takes to win it.)

What is the "Tsunami of Uridashi money" all about?

 

[Billy T]

China is the only one of the 10 biggest economies that is expanding, … The U.S. economy is still shrinking, five months after Congress agreed to President Barack Obama’s $787 billion stimulus package. …The Chinese economy will expand 8.1 percent this year, according to the median forecast of 16 economists surveyed by Bloomberg News after the government released the second-quarter figure. Growth will accelerate to 9.1 percent in 2010, they estimated. …

Intel says consumers in Asia -- especially China -- are leading a recovery in demand for personal computers. The Santa Clara, California-based company’s sales in the Asia-Pacific region rose 21 percent to $4.41 billion in the past quarter, while sales in the Americas and Europe plunged. “We are seeing Asia-Pacific stronger than the rest of the world; in particular, consumption in China looks very good,” Stacy Smith, Intel’s chief financial officer, said in an interview with Bloomberg Television on July 14. “Mature markets are lagging a little bit behind.”

Seoul-based Hyundai’s sales in China surged 56 percent from a year earlier to 257,003 units in the first half, making the country its biggest overseas and fastest-growing market. Sales by South Korea’s largest automaker in the U.S., which used to be its biggest market, dropped 11 percent to 204,686 units, … Industrial production increased 10.7 percent in June from a year earlier, the largest gain in nine months.

“China’s recovery is major positive news, especially for commodities exporters,” said Wang Tao, an economist with UBS AG in Beijing. “The strongest factor in China’s recovery is investment demand, which means it will import more commodities and machinery.” Chinese imports of copper and its products jumped to a record in June, increasing 13 percent from the previous month. …

Tokyo-based Komatsu, the world’s second-biggest maker of earthmovers, said last month its sales in China probably beat expectations in the quarter ended June 30. The company expects the market to grow to about 15 percent of total sales this business year, compared with 10 percent in 2008. …

It’s still too much to hope that China can rally the world, given that its stimulus has been focused on bolstering demand at home, said “There will be some economies that benefit on the sidelines, but that’s not going to help the average Joe on a street in America,” he said.{ Robert Carnell, chief international economist at ING Financial Markets in London.} “Its economy is not going to offset the U.S. and Europe declining simultaneously.”

Economists at JPMorgan Chase & Co., Morgan Stanley, and UBS AG yesterday raised forecasts for Chinese economic growth this year and next as stimulus and lending propel output. “China’s recovery is refreshing news for the world at a time when people have been losing confidence in green shoots,” said Tao Dong, chief Asia-Pacific economist at Credit Suisse AG in Hong Kong. ..."

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aRCF61qaEqd4 July 16, 2009 12:11 EDT

 

[Billy T]

Here is what "Dr. Doom" thinks about BRAZIL (and Peru):

"A couple of countries in Latin America have thus far been able to weather this crisis better than their neighbors. Brazil and Peru stand out for their relatively healthy fundamentals and financial systems. Both countries have benefited from being relatively closed economies and from having diversified export markets and products. They also took advantage of the boom years (2003-08), reducing external vulnerabilities and increasing savings (fiscal and international reserves). By the time these the crisis hit, both countries had well regulated financial systems that saved them from being contaminated by toxic assets. The fact that their domestic credit markets are at an early developmental stage, so consumption is not very dependent on credit, helped them shelter internal demand. Finally, these countries enjoyed strong policy credibility. ..."

FROM: http://www.forbes.com/2009/08/05/re...nouriel-roubini.html?partner=daily_newsletter
{Brazil's bonds are "investment grade" and their rating is very likely to rise higher soon. If rating were honest the US would have lost its "investment grade" last year, but US will never default - just payoff with depressed value, freshly printed, paper.}

I agree with "Dr. Doom", but only own one ADR stock in Peu - BVN See more on this gold and other precious metals miner at: www.buenaventura.com.pe

I own at least 6 Brazilian ADRs and a couple of other stocks bought directly in Brazil but as Brazil has had the highest real interest rates, until very recently and I am old, I mainly keep invested in CD like Brazilian applications for my direct Brazilian assets.

 

[Billy T]

Brazil,India,Rain,Sugar & US dollar:

Too much rain in Brazil's sugar cane fields and too little in India will make your sweet tooth hurt soon.

Global price of raw sugar is now 20.81 US cents / pound! Highest price in 28 years and global stored reserves are at a 34 year low. In late 2008, sugar was 5 cents/ pound. It is headed for near 30 cent/ pound, I think before next harvest. The current global short fall (Demand - supply from crop) is 9 million metric tons! I have no data on how many tons are still stored from prior harvest. Refined (white) sugar in larges volumes (tons) is 24.4 cents per pound. What does a 1 Lb bag cost the final customer in the grocery store now?

Normally India is second only to Brazil as exporter of sugar, but will be importing many tons now to supply growing domestic demand. - I have noticed in Brazil that one of the things the poor buy when they have a few coins, is candy. I expect that is true in India too. It is a simple, relatively cheap, pleasure.

See more expectations on sugar price at: http://www.bloomberg.com/apps/news?pid=20602013&sid=aDRhs0SHKRVM

Dollars keep flooding into Brazil and the central banks seems to have stopped trying to keep the dollar from falling more. (Brazil seems to be giving tax relief to exporters instead.)* On ~3Dec08 (reading data from a graph so may be few days off) a dollar would buy 2.536 Real. (the recent peak). Yesterday it wou buy only 1.822 R$. I.e. in about 8 months, dollar has lost 28% of it value vs the Brazilian Real! the decline seems steady at more than ~3% per month. - Part of the reason why China, not the US any more, is main buyer of Brazil's exports now.
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*A smart move / policy change. Why buy more of a declining asset? More than 200 billion dollars in reserves is more than enough. Do what China is doing: buy real assets when you can to get rid of dollars.

In some sense, Brazil appears to be doing the “flip side” of that: Refusing to let foreigners buy into the huge "pre-salt" oil field discovery. For two years the government has been trying to decide on how to finance the development of this resource.** Final discussion to be given 18 Aug, but it is leaking out now. Brazilian public/ private oil firm, PetroBras will be the exclusive operator, get at least 30% of the oil to sell and more than 50% will belong to the government to finance social programs (officially but in fact billions will be diverted to political campaigns and private pockets - as that is how it is in Brazil).

**Already signed a deal for 10 billion loan from China, to be paid back in oil, so there will be ways around even a “Only PetroBras develops” policy.

I also record a link: http://english.peopledaily.com.cn/90002/96417/6628619.html

 

[Carcano]

Global price of raw sugar is now 20.81 US cents/pound! Highest price in 28 years and global stored reserves are at a 34 year low. In late 2008, sugar was 5 cents/pound. It is headed for near 30 cent/pound, I think before next harvest.

So, is it possible to SHORT the sugar market?

Whats the best way to bet on a price decline...contra ETFs?

 

[Billy T]

So, is it possible to SHORT the sugar market?
...

Probably, but I do not know how -look at the chicago board of trade to start. I's too old for contrcts on delivery etc. I have never gone short, even when young - don't like open ended risk.

There was a crude poem:

"He who sell what isnt his'n must buy it back or go to prison."

 

[Billy T]

"Goldman Sachs Group Inc. raised its forecast for China’s economic growth this year to 9.4 percent, citing “strong momentum..."
FROM: http://www.bloomberg.com/apps/news?pid=20601087&sid=ahKkWO6_bJAc

 

[Billy T]

More on Sugar:
(Ref post 169 )

"...The number of options to buy sugar for delivery in March at 30 cents a pound, 44 percent higher than the Aug. 7 price in New York, has jumped more than 18-fold in four months. The rally is boosting expenses for food makers ...

U.S., consumption will total 11 million short tons (9.98 million metric tons) this year, as farmers produce 7.47 million, the government estimates. The ratio of inventories to total use in the year that ends Sept. 30 will drop to 11 percent*, the lowest since 1975, USDA data show. ...

India’s inventories will fall 50 percent to 4.54 million tons this year, equal to less than three months of consumption, USDA data show.
Output fell 48 percent to 14.7 million tons in the 2008- 2009 marketing year, less than consumption of 23.2 million tons ..."

From & Lots of more facts at: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=axR3nyun9w38
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*That is only a 40 day buffer - hoarding can wipe that out in a week, once it starts. US is "running on empty"

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“… This past June was India's driest for 83 years, while rains in the week to August 5 were 64 percent below normal.
Total rainfall since the start of the monsoon season on June 1 was a quarter below average, the India Meteorological Department said on Thursday.

Monsoon rains are crucially important in India, where just 42.4 percent of agricultural land is irrigated and overall rural demand accounts for more than half of domestic consumption.{Total demand to fall - more economic trouble ahead.} The country has already taken various measures in recent weeks to lessen the impacts of poor rains, including the extension of tax-free sugar imports, limits on grain exports and crackdowns on hoarding. …”

FROM: http://economictimes.indiatimes.com/articleshowpics/4877947.cms

 

[Billy T]

Your chance in BRAZIL, if you have ~$30 million dollars under the matress, you may want to look into:

http://www.bignews.biz/?id=809323&keys=Brazil-Brazilian-Real-Estate as that will buy 10% of the land offered.

The ad itself is interesting reading and that is free. It includes:

"... announcing the availability of two hundred forty seven thousand acres of arable land in the commodity rich Brazilian state of Minas Gerais. ... the land is considered prime for both sugar cane and eucalyptus.

Pregnant with gold, diamonds, precious minerals and gemstones of every sort, with an enormous wealth of agriculture and industry and bolstered for the first time in recent history by an incredibly durable currency... boasting national energy independence, a huge national surplus, investment grade national bonds which continue to be upgraded by ratings agencies even as the world slips deeper into economic crisis, 14 percent of the world’s usable water supply ( 90 percent more than any other nation ), ..."

PS you had better act quick -with dollar buying 3+% fewer Brazilian Real every month now, that price will be $320 million in early September. Price is firm at one quarter of a billion Real to buyer of all.(A significant discount to the $1,250/acre, large parcel price.)

Also others are interested:
"August 06 2009 - Shree Renuka Sugars, a major sugar mill in India, wants to make investments in Brazil and is also seeking partnership to purchase the product in the country. ... The company has US$100 million, raised in the market for the purchase of assets in Brazil and to finance long-term contracts of sugar purchases. Two weeks ago, Narendra Murkumbi, vice president of the group, met with the main sugar and alcohol companies in the country, including Copersucar, Cosan, and Moema Açúcar Guarani, controlled by French group Tereos, and some trading companies.

The group wants to make sugar in Brazil and bring it to India, which reports sharp drop in production. "They are interested in joining a sugar mill in Brazil to ensure they will have the product” said a source who met with the group. Getting closer to Brazilian mills is strategic for Indian companies now. ..."

From: http://foodbizdaily.com/articles/91413-shree-renuka-sugars-visitinng-brazil-to-buy-sugar-and.aspx

 

[Billy T]

Lula is one of the most remarkable men of our times. Read The Economists story on him mainly at link below quote.
Brazil's President, Lula, "... showed political courage in sticking to responsible economic policies, ignoring calls from his left-wing Workers’ Party to default on debt. His instinct for rational economics has turned him from a protectionist into a champion of free trade. His ambitious social policies have helped to lift 13m Brazilians out of poverty; searing inequalities of income are narrowing steadily. Despite almost supernatural popularity ratings, he has wisely rejected talk of changing the constitution to run for a third term. ..."

FROM: http://www.economist.com/opinion/displaystory.cfm?story_id=14214011

Prior to his first election, people with money in Brazil were so desperate to get it out of the country that I sold dollars to them never below 4 real to the dollar and some at 4.5R$/$ - now a dollar will only buy 1.818R$. Calling my average exchange ratio 4.25R$/$ that is gain in FX only of 234% in 7 years; but I invested the Real I got in Brazilian stocks, and CD like applications, which until a few months ago gave the world's highest real rate of return (often more than 1% each month!), and mainly Bank of Brazil stock, which closed yesterday at 24.60R$/sh and has split twice 2 for 1 since I bought it - effectively reducing my <16R$/sh cost to less than 4R$/sh so the gain on BB stock is 6.15 fold. If I wanted to, but surely do not, I could now sell the BB stock, and re-buy $14.39 dollars for every one dollar I sold ~7 years ago to panicky rich Brazilians! Not exact, but roughly a 165% dollar gain every year for seven years or at least 140% after taxes annual gain!
I told everyone who read my posts to invest in Brazil, but bet none did.

I listened to Lula, a very gifted orator when he was campaigning for his fifth and finally successful attempt to win the presidency. His responses to question showed his great native intelligence. I knew he would not destroy the Brazilian economy by doing the things he advocated to win the support of the left wing masses. (Cancel the debt, confiscated the larger bank accounts to pay off the domestic debt, much of which is via small savings accounts called "poupanca" that are tax free, etc. - I.e. take Brazil down the disastrous road Argentina has followed, so I bet my dollars on Lula's brains and good judgment.)

Also just recognition of his pre-election achievements made me confident: More self-made than Abe Lincoln, who had a well educated step mother. Neither of Lula's parents could read or write! He got his first pair of shoes, "hand-me-downs" at that, from an older brother when he was 12 years old! Yet founded Brazil's most power labor union and lead the auto workers to prosperity without destroying the productivity of the factories.

I made a lot of money, recognizing this as the rich of Brazil panicked, when the pre-election polls indicated that he would win on his fifth try for the presidency. Ironically those same rich are now worried about Brazil’s future without Lula! I am not – Brazil will prosper with its great natural resources gifts, the corruption is decreasing, and now with China as the main and very natural market for those resources and Brazil’s world leading position (in most area, but second to the USA in some) agricultural exporter, 14% of the entire world’s usable fresh water, huge and not yet fully explored new “pre salt” oil field, etc. Brazil’s prosperity has just started to be displayed. Brazil is behind only China, Japan, and England, as largest holder of US treasury bonds, but wisely is the first of all the top 15 to start dumping them – has 25.5 billion less now than 6 months ago.

 

[Billy T]

China

"In the first six months of the year, China's current account surplus reached 130 billion USD, down 32 percent year on year. ... The surpluses in income and in current transfers were 16 billion and 14.3 billion USD respectively.

The capital and financial account had a surplus of 33.1 billion USD in the first half of the year, a year on year slump of 54 percent. The net FDI inflow reached 20.6 billion USD. The inflow of portfolio investments valued 16.9 billion USD. Other outflow of other investments reached 5.6 billion USD. *

The country's forex reserves had increased by 185.6 billion USD to 2.1 trillion USD by the end of June from the end of 2008. ..."

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China continues to buy up natural resources (lessen it holding of US treasury paper by spending dollars):

"... business relations basically remain unaffected by recent disputes, {between Chnia and Australia were strained by Rio Tino not selling as agreed and China putting Rio staff on trial} pointing to Australia's $41.5 billion deal signed this week to sell liquefied natural gas to PetroChina. ..." {That is 20 year delivery deal} Note also that last week, India signed an almost idential deal with Austrailia for half the price and half the volume of gas. The US is too broke to be in the market now for future energy supplies.

Both hese stories FROM:http://english.peopledaily.com.cn/ (22Aug09 edition)

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*Net "trickle down" into China is finally slowing - only 31.9 billion dollars in 1H09 - but that will still build many modern factories etc. Fortunately they will mainly be making products for the rapidly growing domestic demand, not be sent to Wal-Mart etc.

Perhaps some of the closed textile plants in NC, etc. can reopen? (But if they do, you will pay at least 50% more for your white shirt etc.) I.e. Republican trickle down taz relief for the wealth under GWB not only closed US factories, but now will boost the US's problems with inflation when the economy starts to recover (assuming it ever does).

 

[Billy T]

China has 6 of the 10 largest ports in the world and is expanding the port of Shanghai. The 10 billion dollar project started in 2002 and is now 70% completed. To get the deep water large modern container ships require, two small off shore islands were joined by 100 million tons of fill. And a 6 lane highway – a bridge over the ocean 32.5 Km long to the islands was built. The new port will be the largest and most modern in the world with the entire operation under centralized computer control. (For movement of ships / docking / unloading cranes / loading trucks with containers / etc.) This off shore annex, called Yangchuan (Yangshan?), to existing port of Shanghai, which already second only to Singapore Port in cargo handled* will be fully competed in 2012. No American port is even in the top ten by volume of cargo, which are:

1. Singapore
2. Shanghai
3. Hong Kong
4. Shenzhen
5. Busan
6. Dubai
7. Guangzhou
8. Ningbo
9. Rotterdam
10.Qingdao

Number 5 is in S. Korea, 6 in the UAE, and 9 in Europe. Numbers 2,3,4,7,8 &10 are in China.
The dollar is losing importance in the world. Asia, lead by China, is claiming the 21st century.

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*When Shanghai’s offshore annex is completed it will be the world’s largest, significantly larger than the City State’s Port of Singapore.

 

[Billy T]

"... China’s industry minister, earlier this month ordered the nation’s steel industry to refrain from expanding capacity. Chinese mills have capacity to produce 660 million metric tons of steel each year and there’s demand for only 470 million tons ... “Plans to purely expand capacity of mills won’t be approved."{for 3 years, he said}

China produced 500.5 million metric tons of steel last year as the world’s largest producer. That’s more than the combined output of Japan, the U.S., Russia and India, the next four biggest makers, according to the World Steel Association. In the first seven months of 2009, China accounted for almost half of global steel output. The nation is also the world’s biggest coal producer and consumer, accounting for 43 percent of global demand last year, according to BP Plc. Imports averaged 8 million tons a month this year, more than twice last year’s average of 3.4 million tons.

China produced an estimated 1.45 billion tons of cement last year, accounting for half of world output and making it more than eight times bigger than its nearest rival India, ..."

FROM: http://www.bloomberg.com/apps/news?pid=20601087&sid=anTNV1tDVs0w

Clearly a rapidly growing economy - possibly even back to double digit GDP growth in early 2010.

 

[Billy T]

Part of why China is the future:

1.China is the only large economy on Earth that’s growing at a significant pace, posting a 7.9% increase in GDP growth in the second quarter.

2.China has no restrictions on spending stimulus money.

3.China’s banks are stronger, with no subprime mess holding them back.

4.China has more than a $2 trillion surplus to spend as it sees fit.

5.Chinese banks have lent out nearly $1 trillion already this year—which tops lending in all of 2008!

6.China is buying more real assets with its 2 trillion of reservers, especially energy and minerals in long term contracts, at current cheap prices.

And here is more of the same:

" China Investment Corp., the country’s sovereign wealth fund, is continuing to shift its investments away from cash and is investing billions in hedge funds and private-equity funds, Chairman Lou Jiwei said. China Investment has invested “many times” the $500 million that CIC was reported to have placed in hedge funds and private-equity firms in June, Lou said today in an interview in Beijing. He said China Investment was also investing in fund-of- funds. ..."
*{See footnote also as this direct buying, instead of investing in funds etc. is much much bigger.}

FROM: http://www.bloomberg.com/apps/news?pid=20601087&sid=a4FINX22BV8c

Billy T comments:
Especially on points (4) & (6) - "Getting out of dollars." Note, in 2009 alone, China has signed 90 billion dollars worth of "currency swaps" with other nations, including Brazil. I.e. with Yuan at Brazil's central bank, imports from China can be paid for in Yuan, not dollars, and when China buys iron ore or soy beans from Brazil they pay in Brazilian Real, not dollars. China has replaced the USA as Brazil's largest trading partner now - why use dollars?

People who think that the dolllar is not replacable do not know or understand that it is already happening! The IMF is starting to get serious about Special Drawing Rights as dollar alternative also. - In process of issuing 250 Billion more. Each SDR is backed by a basket of currencies including the dollar. In a few years, when China imports more than it exports, to serve the demands of it growing middle class, both in salaries and in numbers (320,000 with about 1.5 Million or more dollar now.) China will freely float the Yuan. This will of course greatly boost the purchasing power of China's growing middle classes, as importing French wine etc. will be cheaper. I.e. China will be come a net inporting nation as exports rapidly fall (in large part because US and EU are broke - entering into depression.)

Then, with a strong, increasingly valuable Yuan, and a weak collapsing dollar, what do you think central banks will hold their reserves in?

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* “… PetroChina Co., the world’s most valuable company, posted profit that beat analysts’ estimates on record earnings from oil refining after the government raised fuel prices and China’s economic recovery spurred demand. … The gains contrast with earnings declines at Exxon Mobil Corp. and Royal Dutch Shell Plc after the global recession cut U.S. and European consumption. PetroChina, Sinopec and Cnooc Ltd., the nation’s biggest oil companies,
this week pledged to step up acquisitions of energy reserves and refineries overseas to take advantage of lower valuations after oil prices slumped. …”

FROM: http://www.bloomberg.com/apps/news?pid=20601087&sid=ameZc8_zhfMw

 

[Billy T]

China is diversifying its reserves via investments as well as direct buying of assets (item 6 of prior post):

"... China Investment Corp is investing as much overseas each month this year as it did in all of 2008, Lou Jiwei, the chairman of the $298 billion sovereign wealth fund, said on Saturday. ... CIC was set up in September 2007 with $200 billion of foreign currency reserves transferred from the central bank, which manages its own stockpile of $2.13 trillion.

"If our returns are not bad and the state's FX reserves are still rising, we may go and ask for more," Lou said. ..."

FROM: http://english.peopledaily.com.cn/90001/90776/90884/6743250.html