今
年中国对海外铁、油、铜的投资，历史上第一次超过了对美国国债的投资。今年上半年，中国对硬资产(hard assets)的投资是310亿美元，对美国国债的投资是230亿美元。专家说，每类资产的全年投资将达到550亿美元左右。但是，即便两类投资数额相等，这也标志着中国与过去的做法相比出现了一次重大转折。多年来，大陆对海外硬资产的投资一直接近于零，而购买美国国债的资金一年最高可以达到1,000亿美元。
中国现在对硬资产拥有如此贪婪的胃口原因何在？提得最多的原因是支持其快速扩张的工业基础的需要。说得很对。但同样重要的是，要把中国减少购买美国国债、大幅增加硬资产收购的行为看作其外汇储备战略的一部分。人们普遍认为人民币对美元处于低估状态，低估幅度最大或达40%。根据过去几年中国采取的措施来看，中国官员似乎可能会允许盯住美元的人民币每年对美元升值2%到3%。
在美元如此疲软的情况下，继续大量投资美国国债或任何其他美元资产都是没有多少道理的。每年的利息收入很容易就被美元币值的损失超过了。北京对美国债务的信用也存在强烈担忧。随着美元继续贬值，更聪明的赌博是投资那些可能保值、甚至增值的资产。
塞拉利昂的铁矿石，南非的矿山，澳大利亚的煤炭和天然气，巴西、委内瑞拉的石油，就连加拿大的木材行业也在受中国需求的拉动而实现复苏。仅上个星期，中国就提高了对其核电厂所需铀矿数量的估计。
美联储最近开始购买6,000亿美元国债的措施，也就是第二轮定量宽松(QE2)，只会使中国进一步加快收购硬资产的步伐。麦格理银行(Macquarie Bank)驻伦敦大宗商品部负责人列侬(Jim Lennon)说，由于QE2实际上就是印刷钞票，它使美元的吸引力进一步下降；分散储备肯定是中国的一个政策取向，而他们购买大宗商品是一种战略投资，并且是相机行事。
John Patrick
中国这边，它既要做出合理的投资，又要确保美国经济保持稳健，足以吸纳中国的出口，两个方面必须兼顾。随着中国进一步扩大国内市场、降低对出口的依赖，这种考虑将变得不那么重要。
好几年以来，中国一直在以飞快的节奏积累硬资产。今年以来规模最大的收购包括：中国最大的海上石油生产企业、最有势力的国有企业之一中国海洋石油有限公司(CNOOC)正斥资22亿美元收购Chesapeake Energy在美国的页岩油气资产，并以31亿美元的价格收购阿根廷Bridas Energy旗下一家公司50%的股权。中国国家电网公司已斥资10亿美元收购智利的铜矿。中国石化(Sinopec)拿出46亿美元，收购了ConocoPhilips公司9%的股权，另外还以71亿美元的价格收购了Repsol公司巴西分公司40%的股权。
当中国不能收购企业的时候，它就购买相关的大宗商品。中化化肥(Sinofert)曾考虑收购加拿大Potash Corp.以反制必和必拓(BHP Billiton)的敌意收购，后来放弃，上周它又宣布将从Canpotex收购22亿美元的钾肥。Canpotex是一家垄断组织，三家成员公司当中就有Potash。
中国对硬资产的投资正在迅速增加。6月份，在净抛156亿美元美国国债和机构债券同时，它又拿出11亿美元收购加拿大的矿藏和莫桑比克的煤炭储备。中国外交部北美大洋州司副司长陆慷解释说，中国的各项工业正在进行升级，对这些材料的使用量都非常大。
中国商务部美大司司长何宁也说，中国开始进行海外投资是在回归世界，这仅仅是一个开始，随着这类收购越来越多，人们将不再关注。
然而目前来看，硬资产投资使中国成为了焦点。哥伦比亚大学（Columbia University）威利可持续投资演技中心（Vale Center for Sustainable Investment）研究员戴维斯（Ken Davies）指出，2008年，在各国全球投资流动下降15%的情况下，中国却增长了一倍多。2009年，全球投资流动下降了43%，而中国却上涨了1%。若中国铝业公司增持矿业巨头力拓公司（Rio Tinto）的交易未破裂，中国2009年对外投资将会增加36%。根据数据信息提供机构Dealogic，去年中国从美国购买的资产首次超过美国在华购买资产。
美国传统基金会（Heritage Foundation）研究员赛瑟斯（Derek Scissors）说，2010年，中国在全球范围内的非债券投资将会达到550亿美元，主要是大宗商品。该基金会有一个数据库，记录了规模一亿美元以上的中国投资。该基金会的数据对中国商务部每年公布的官方数据进行紧密跟踪。
U.S. Trust首席市场策略师昆兰（Joe Quinlan）说，同时，今年中国对美国政府债券的净购买额有可能从去年的1000亿美元左右下跌至550亿美元。昆兰说，他们只是美元太多了，第二轮定量宽松将会使购买美国债券的意愿进一步降低。
中国硬资产投资大部分都来自国有企业，这是中国产业战略的一部分，国有企业暗中享有政府的保证。他们通常占有少数股权，因为大手笔的收购行为让人紧张。风险管理咨询机构Veracity Worldwide中国专家博尔金森（Michael Perkinson）说，中国公司一贯深思熟虑，中国海洋石油有限公司2003年收购加州联合石油公司（Unocal）的交易受到美国国会阻挠后，中国公司觉得深受挫折。
还有些投资来自中国投资有限责任公司（简称中投公司）和国家外汇管理局，这两个主权财富基金均承担着使中国规模高达2.5万亿美元的外汇储备多元化的任务。金融危机期间，中投公司所持黑石（Blackstone）和摩根士丹利（Morgan Stanley）大部分股权价值下滑，随后中投公司重估了自己的战略，去年投资了香港来宝集团（Noble Group）、俄罗斯诺贝鲁石油（Nobel Oil）和加拿大南戈壁能源有限公司（South Gobi Energy Resources）等大宗商品公司。
2001年，中国开始实施“走出去”战略，促使中国公司走向全球化，从而发展世界级品牌，促进进口资源多样化，扩大出口市场，增强竞争力以及减少低回报外汇储备。美国就是“走出去”的理想目的地：中国持有大量美元，美国则有中国所需的众多种类的资源。例如联想就收购了IBM的全球计算机业务。前美国外交官、里昂证券亚太区市场（CLSA Asia-Pacific Markets）中国市场高级分析师罗福万（Andy Rothman）说，他们在推动资源需求的增长但却没有一席之地，这令他们沮丧。
接着，在2005年，因美国国会的一致反对，中海油撤消了对加州联合石油公司的收购，交易以失败告终。在美国受挫后，中国开始在全球其他地方寻求资产投资。但西方跨国公司将大部分资源牢牢抓在手中。中国著名经济学家、曾任中国央行顾问的樊纲说，问题在于现存的垄断体制很难破除，作为“迟到者”是很难的，我们迟到了，并且被逼到了 角。
这将中国推向了全球更危险的地区，大举进军资源丰富的非洲。中国将2006年定为非洲年，开始从那里购买资源。
中国向那些西方可能认为声名狼藉的国家领导人示好。任职于颇具影响力的中国国际问题研究所的资深研究员晋林波说，在中国，没有“失败国家”的概念，中国的方式是加快发展的步伐。
冷战结束后，在许多非洲国家的投资急剧下跌，因此中国对非洲的兴趣得到大量支持。除了直接投资，中国还提供低息贷款和改善基础设施，出口信贷，中国大陆高级领导人也频繁访问非洲。
中国工商银行购买了非洲最大的金融机构标准银行（Standard Bank）20%的股权。中国为苏丹总统府提供资金支持，还建造了众多足球场。伦敦渣打银行（Standard Chartered）中东、非洲、欧洲和美洲首席执行长V. Shankar,说，一般的跨国公司会做一次性交易，而中国会修建一个港口或一个炼油厂，中国在对非洲有价值的项目上投入了大量时间。
就连未受非议的国家也对中国表示欢迎。博茨瓦纳总统曾说过有名的一句话：我发现中国平等的对待我们，而西方把我们看做曾经的臣民。中国向这些国家要求的回报只有一样，那就是切断与台湾的关系。
想想美国石油公司Kosmos Energy所持的加纳超大海上油气田股份吧，加纳国家石油公司(Ghana National Petroleum Corp.)和中海油这两个国有企业联合出价50亿美元竞购这个油气田。因为有迹象显示加纳更倾向于中国参与的报价，于是埃克森美孚(Exxon Mobil)8月取消了其40亿美元的报价。中国进出口银行(China Export-Import Bank)9月向加纳提供了104亿美元的贷款，用于基础设施项目的建设。同月，中国国家开发银行(China Development Bank)向加纳另外提供了一笔规模30亿美元的贷款，用于其石油和天然气行业建设。上周，总部位于美国德克萨斯州的Kosmos Energy以报价过低为由拒绝了中海油的报价，但观察人士认为中海油还会继续为之努力。Kosmos Energy的股东包括华平创业投资有限公司(Warburg Pincus)与私募股权公司黑石集团。
中国在哈萨克斯坦和乌兹别克斯坦分别修建了石油管道，并且已开始在阿富汗首都喀布尔南面开采铜矿。中国希望在巴基斯坦和阿富汗修建贯穿两国的公路和石油管道。这些都让美国官员如坐针毡。美国驻亚洲的一位高级外交官说，中国人不是特别关注政治，他们是寡头垄断买家，推高世界各地的商品价格，美国在制定贸易政策时需要考虑中国指导其国有企业的方式方法。
相比之下，中国在澳大利亚的投资争议较少。中国在澳洲的业务规模巨大，澳大利亚外商投资审核委员会(Foreign Investment Review Board)建议，中国拥有的股权应低于50%。中国收购者在澳大利亚2009年全部入境采矿交易中所占比例高达40%。中国已承诺将从雪佛兰(Chevron)澳洲巴罗岛(Barrow Island)价值370亿美元的项目中购买20年的天然气。中国目前拥有力拓股份有限公司(Rio Tinto)9%的股权并曾试图收购更多股权，该收购交易未能达成，后来中国以涉嫌行贿为由拘捕了力拓驻中国的一位高管。
中国计划于明年初付诸实施的新五年规划将更加关注经济的可持续增长，即增加消费，减少对出口的依赖，提高国内工资及提升能源效率。美国传统基金会(Heritage Foundation)的史剑道(Scissors)说，这可能会“放缓”中国对资源的需求，但在大宗商品和初级产品方面仍会出现供应不足的局面，因此中国将为保护供应而投资。
未来数年，中国将面临其它快速发展的国家对资源的更多竞争，这些国家都在工业化过程中，并且拥有大规模的美元外汇储备。据美国东西中心(East West Center)的麦智涛(Christopher McNally)表示，2009年全世界总共8.1万亿美元的外汇储备中，超过60%的外汇储备为11个亚洲国家所有。
花旗集团(Citigroup)驻香港亚太区并购负责人彭高年(Colin Banfield)说，2008年爆发的金融危机鼓动人们投资硬资产，而不是美国国债，现在的心态就是大家愿意将钱投到实体业务当中，而不是持有美元。
渣打集团(Standard Chartered)的尚卡尔(Shankar)说，正是由于对非洲资源的收购，中国才以相当大的幅度领先于印度。
人民币不断升值也意味着中国人去海外收购将愈加容易。里昂证券亚太区市场(CLSA Asia-Pacific Markets)表示，1美元兑人民币汇价如今是6.65元，若能降到5元，将减少“经济扭曲”现象，并有助于建立一个消费型经济，中国市场将骤然扩大33%。里昂证券预测，若汇价按5元计算，中国外汇累积及其官方购买美国国债的速度与当前相比将极大放缓。中国制造的吸引力将有所下降，而美国工厂的吸引力则会增强。
已经是世界第二大经济体的中国，未来十年预计其中产家庭将超过3.5亿个。想象一下那对未来的产品价格将意味什么。
中国是世界上目前铜、锡、钢铁、煤炭、铝和海运铁矿石的第一大消费国，石油的第二大消费国。投资者正对一系列他们认为会从中国消费中受益的公司下注。对投资公司T. Rowe Price来说，这类公司包括世界上最大的上市铜生产商Freeport McMoran Copper & Gold(FCX)、博地能源公司(Peabody Energy (BTU))和Joy Global (JOYG)。
T. Rowe Price公司从事原材料行业研究的Rick de los Reyes说，现在的情况是，任何大宗商品都受到中国强劲需求的影响。
T. Rowe Price公司能源专家德里斯科尔(Shawn Driscoll)说，从某种角度讲，中国堪称拥有最完备的信息，因为推动大宗商品价格上涨的主要是中国需求。德里斯科尔密切观察着中国在全球的一举一动。他说，中国政府清楚自己哪些需求属于长期行为，在我看来，中国人是最知情的买家。
而对美国国债市场来说，可能就没这样的好事了。
Leslie P. Norton
（更新完成）
（本文译自《巴伦周刊》）
（本文版权归道琼斯公司所有，未经许可不得翻译或转载。）
This year, for the first time ever, China has been investing more overseas in assets like iron, oil and copper than it puts into U.S. government bonds.
China in this year's first half spent $31 billion on hard assets, compared with $23 billion on Treasuries and other U.S. government bonds. Experts say China's investments in each of these asset classes will total about $55 billion for the full year. But even a tie marks a major turnaround from China's previouspractices. For many years, the mainland spent next to nothing on hard assets abroad, while its purchases of U.S. government debt ranged as high as $100 billion a year.
Why does China now have such a voracious appetite for hard assets? The most frequently cited reason is its need to feed its rapidly expanding industrial base. True enough. But it's also important to see China's reduction in Treasury purchases and its sharp increase in hard-asset deals as part of its currency strategy. It's widely accepted that the Chinese currency, the yuan, is undervalued against the dollar, perhaps by as much as 40%. Based on moves made in the past few years, it seems likely that Chinese officials will let the yuan, which is pegged to the dollar, rise by 2% to 3% against the greenback each year.
In the face of such a weak dollar, it doesn't make much sense to keep investing heavily in Treasuries or any other dollar-based asset. The annual interest payments can easily be outweighed by the loss in the dollar's value. There are serious concerns in Beijing, too, about the creditworthiness of U.S. debt. The smarter bet is to invest in assets that are likely to hold their value, or even increase in value, as the dollar continues its slide.
Iron ore in Sierra Leone. Mines in South Africa. Coal and gas in Australia. Oil in Brazil and Venezuela. Even Canada's timber industry is reviving as a result of demand from China. Just last week, China jacked up estimates for how much uranium it will need for nuclear power plants (see story on page 27).
The recent move by the Federal Reserve to start buying $600 billion of government bonds, known as QE2, will only hasten China's rush for hard assets. Because it amounts to printing money, 'QE2 makes the dollar even less attractive,' notes Jim Lennon, head of commodities at Macquarie Bank in London. 'It's certainly a policy orientation of China to diversify, and they are buying commodities as a strategic investment, and opportunistically.'
China's preference for hard assets over Treasuries, taken by itself, is sure to put upward pressure on U.S. interest rates and make U.S. economic growth somewhat more difficult than it would be if China went back to its previous policy of buying heftier amounts of U.S. government debt each year. Lately, however, any 'China effect' has been overwhelmed by Treasury purchases by the Federal Reserve.
For its part, China must maintain a balance between investing wisely and making sure the U.S. remains economically healthy enough to absorb Chinese exports. That consideration will become less important as China further expands its own domestic market and becomes less reliant on exports.
China has been accumulating hard assets at a rapid clip for several years. Among this year's biggest deals, CNOOC (ticker: CEO), China's largest offshore oil producer and one of its most powerful state-owned companies, is spending $2.2 billion for shale acreage in the U.S. owned by Chesapeake Energy (CHK) and $3.1 for 50% of a unit of Argentina's Bridas Energy. State Grid Corp. of China plowed $1 billion into Chilean copper deposits. Sinopec (SNP) coughed up $4.6 billion for 9% of ConocoPhilips (COP) -- and another $7.1 billion for 40% of Repsol's (REP) Brazilian unit.
When China can't buy the business, it buys the underlying commodity. China's Sinofert, after weighing and dropping a bid for Potash Corp. (POT) to counter BHP Billiton's hostile offer, announced last week that it would buy $2.2 billion of the key fertilizer ingredient from Canpotex, the monopoly whose three members include Potash.
Chinas's investments in hard assets are growing quickly. In June, even as the mainland dumped a net $15.6 billion of U.S. Treasury and agency bonds, it also bought $1.1 billion in Canadian minerals and Mozambique coal deposits. 'China is upgrading its industries, and all are very heavy users of these materials,' explains Lu Kang, deputy director general of the Ministry of Foreign Affairs in Beijing.
Adds He Ning, director general of the Ministry of Commerce in Beijing: 'China is starting to make overseas investments as a return to the world. It's just a start.' As such deals become more numerous, says He, 'people will no longer pay attention.'
For now, though, the hard-asset investments are making China a standout. In 2008, even as global investment flows by countries around the world fell by 15%, China's more than doubled, points out Ken Davies, a research fellow at Columbia University's Vale Center for Sustainable Investment. In 2009, when the global flows fell 43%, China's inched up by 1%. Had Chinalco's bid to increase its stake in mining giant Rio Tinto (RIO) not fallen apart, China's foreign investment in '09 would have been up by 36%. And last year, for the first time, China purchased more assets in the U.S. than the U.S. did in China, according to data information provider Dealogic.
For 2010, China's nonbond investments around the world, primarily commodities, should hit $55 billion, says Derek Scissors, a research fellow at the Heritage Foundation who keeps a database of China's investments over $100 million. The foundation's data closely tracks the official data published annually by Beijing's Ministry of Commerce.
At the same time, China's net purchases of U.S. Treasury securities are likely to fall to $55 billion this year from about $100 billion last year, says Joe Quinlan, chief market strategist at U.S. Trust. 'They're just drowning in dollars,' says Quinlan. 'QE2 will make them even less likely to want U.S. paper.'
Much of China's hard-asset investing is by state-owned companies as part of Beijing's industrial strategy; as state-owned operations, they bear an implicit government guarantee. They often take minority stakes because all the check-writing makes people nervous. Says Michael Perkinson, the China expert at Veracity Worldwide, a risk-management consultancy: 'Chinese companies are committed to being very deliberate.' After CNOOC's 2003 takeover bid for Unocal was thwarted by Capitol Hill, 'They feel they've been burned.'
Some of the investments are made by China Investment Corp. and the State Administration of Foreign Exchange Investment Co., both sovereign-wealth funds that are charged with diversifying China's $2.5 trillion in foreign-exchange reserves. After the values of big stakes in Blackstone and Morgan Stanley slid during the financial crisis, CIC reevaluated its strategy, investing last year in commodity companies like Hong Kong's Noble Group, Russia's Nobel Oil, and Canada's South Gobi Energy Resources.
In 2001, Beijing launched its 'zou chuqu' edict for Chinese companies to 'go global' -- to develop world-class brands, diversify import sources, expand export markets, boost competitiveness and reduce low-return currency reserves. The U.S. was the perfect destination: China had massive amounts of dollars and the U.S. had plenty of the types of resources that China needs. Lenovo (0992.Hong Kong), for example, acquired a world-class PC manufacturer from IBM. Relates Andy Rothman, a former U.S. diplomat and the top China analyst at CLSA Asia-Pacific Markets: 'It was frustrating to them that they were driving the growth in demand for resources but didn't have a seat at the table.'
Then came the Unocal debacle in 2005, when CNOOC withdrew a buyout offer after organized opposition from Congress. Reeling, China began a hunt for assets elsewhere around the globe. But Western multinationals had most of the resources tied up. 'The problem is the existing monopoly system is very hard to break down,' says Fan Gang, a prominent Beijing economist and former advisor to China's central bank. 'Being a latecomer is not easy. We were very late, and very cornered.'
That drove China to some of the riskier parts of the globe. It pushed heavily into resource-rich Africa. Beijing pronounced 2006 'The Year of Africa' and began buying up resources there.
It wooed leaders of countries the West might find unsavory. 'In China, there is no concept of a failed state. The Chinese way is to stoke the pace of development,' says Jin Linbo, a senior fellow at the influential China Institute of International Studies in Beijing.
In many African countries, where investment plummeted after the end of the Cold War, China's interest was hugely appreciated. China offered, in addition to direct investment, a mix of cheap loans and infrastructure improvements, export credits, and regular visits by top brass from the mainland.
Industrial & Commercial Bank of China (1398.Hong Kong) -- bought 20% of Standard Bank, the continent's largest financial institution. China financed the presidential palace in Sudan. It built soccer stadiums. 'If you are a typical multinational, you do a one-shot deal. China will build a port, a refinery. China is investing big time in what counts for Africa,' says V. Shankar, CEO for Middle East, Africa, Europe and the Americas for Standard Chartered, the London-based banking company.
Even noncontroversial nations welcomed the People's Republic. Botswana's president famously said: 'I find that the Chinese treat us as equals. The West treats us as former subjects.' All that the mainland asks for, in turn, is that the countries cut ties with Taiwan.
Consider the case of Kosmos Energy's stake in a massive offshore field in Ghana, which state-owned Ghana National Petroleum Corp. and CNOOC offered to buy for $5 billion. Exxon Mobil (XOM) withdrew a $4 billion offer in August, amid signs that Accra favored the Chinese-backed bid. The next month, China Export-Import Bank loaned Ghana $10.4 billion for infrastructure projects; China Development Bank offered another $3 billion loan to develop Ghana's oil and gas sector. Last week, Texas-based Kosmos, which is backed by Warburg Pincus and Blackstone, rejected the CNOOC offer as too low. But observers believe the CNOOC group will keep pursuing it.
China built pipelines across Kazakhstan and Uzbekistan, and began mining for copper south of Kabul. It hopes to build roads and pipelines through Pakistan and Afghanistan. That has U.S. officials seething. 'The Chinese are not particularly concerned about the regime they deal with. They are oligopoly buyers who drive up prices all around the world. In U.S. trade policy, we need to think about the way China is directing its state-owned companies,' says one top U.S. diplomat in Asia.
Less controversially, China invested heavily in Australia, where it is such a large presence that Australia's Foreign Investment Review Board recommends that Chinese ownership stakes stay below 50%. In Australia, Chinese acquirers accounted for 40% of 2009's inbound mining transactions. The mainland has committed to buying 20 years worth of natural gas from Chevron's $37 billion project on Australia's Barrow Island. It already owns 9% of Rio Tinto and has tried to buy more; after that effort failed, it detained a Rio Tinto executive in China for alleged bribery.
Beijing's new five-year plan, to be adopted early next year, will focus on more sustainable growth: higher consumption, lower dependence on exports, increased wages in the interior, more efficient energy consumption. That might 'slow' demand for resources, says Scissors of the Heritage Foundation, 'but they will still have a deficit in commodities and primary products and will invest to protect supply.'
In coming years, China will face more competition for resources from other rapidly developing nations, all of them industrializing and huge owners of dollars. Of the total $8.1 trillion in foreign exchange reserves held by countries in 2009, more than 60% was held by 11 Asian countries., according to Christopher McNally of the East West Center.
'The financial crisis of 2008 encouraged people to make investments in hard assets as opposed to U.S. Treasuries,' says Colin Banfield, head of Asian mergers and acquisitions for Citigroup in Hong Kong. 'There's a desire to spend reserves on actual businesses rather than holding the currency.'
Thanks to its resource purchases in Africa, 'China has leapfrogged India by a quarter mile,' says Shankar of Standard Chartered.
The appreciating yuan also means buying abroad will be easier. CLSA Asia-Pacific Markets says that a rate of five yuan to the dollar, versus 6.65 today, would reduce 'economic distortions,' and help create a consumer economy: China's market would suddenly become 33% larger. At that rate, CLSA predicts, China's 'reserve accumulation and consequently its official purchases of U.S. Treasuries will slow to a tiny fraction of the current pace.' Manufacturing in China gets less attractive; factories in the U.S. become more alluring.
Already the world's second-largest economy, the mainland is expected to have more than 350 million middle-class households in the next decade. Imagine what that means for future commodities prices.
China is now the world's largest consumer of copper, tin, steel, coal, aluminum and seaborne iron ore, and the second largest consumer of oil. And investors are betting on an array of companies they think will benefit. At T. Rowe Price, that includes companies like Freeport McMoran Copper & Gold (FCX), the largest publicly traded copper producer, Peabody Energy (BTU) and Joy Global (JOYG).
'The reality of the situation is everything you touch in commodities is affected' by China's hearty appetite, says Rick de los Reyes, who follows the materials industry for T. Rowe Price.
'In some ways, China has the most perfect information, because much of what's driving commodity prices higher is Chinese demand,' says Shawn Driscoll, an energy specialist at T. Rowe Price and keen observer of the mainland's movements around the globe. 'The Chinese government knows what their needs are long-term. From my perspective, they are the most informed buyer.'
For the U.S. Treasury market, that may not be such a good thing.
Leslie P. Norton
China in this year's first half spent $31 billion on hard assets, compared with $23 billion on Treasuries and other U.S. government bonds. Experts say China's investments in each of these asset classes will total about $55 billion for the full year. But even a tie marks a major turnaround from China's previouspractices. For many years, the mainland spent next to nothing on hard assets abroad, while its purchases of U.S. government debt ranged as high as $100 billion a year.
Why does China now have such a voracious appetite for hard assets? The most frequently cited reason is its need to feed its rapidly expanding industrial base. True enough. But it's also important to see China's reduction in Treasury purchases and its sharp increase in hard-asset deals as part of its currency strategy. It's widely accepted that the Chinese currency, the yuan, is undervalued against the dollar, perhaps by as much as 40%. Based on moves made in the past few years, it seems likely that Chinese officials will let the yuan, which is pegged to the dollar, rise by 2% to 3% against the greenback each year.
In the face of such a weak dollar, it doesn't make much sense to keep investing heavily in Treasuries or any other dollar-based asset. The annual interest payments can easily be outweighed by the loss in the dollar's value. There are serious concerns in Beijing, too, about the creditworthiness of U.S. debt. The smarter bet is to invest in assets that are likely to hold their value, or even increase in value, as the dollar continues its slide.
Iron ore in Sierra Leone. Mines in South Africa. Coal and gas in Australia. Oil in Brazil and Venezuela. Even Canada's timber industry is reviving as a result of demand from China. Just last week, China jacked up estimates for how much uranium it will need for nuclear power plants (see story on page 27).
The recent move by the Federal Reserve to start buying $600 billion of government bonds, known as QE2, will only hasten China's rush for hard assets. Because it amounts to printing money, 'QE2 makes the dollar even less attractive,' notes Jim Lennon, head of commodities at Macquarie Bank in London. 'It's certainly a policy orientation of China to diversify, and they are buying commodities as a strategic investment, and opportunistically.'
China's preference for hard assets over Treasuries, taken by itself, is sure to put upward pressure on U.S. interest rates and make U.S. economic growth somewhat more difficult than it would be if China went back to its previous policy of buying heftier amounts of U.S. government debt each year. Lately, however, any 'China effect' has been overwhelmed by Treasury purchases by the Federal Reserve.
For its part, China must maintain a balance between investing wisely and making sure the U.S. remains economically healthy enough to absorb Chinese exports. That consideration will become less important as China further expands its own domestic market and becomes less reliant on exports.
China has been accumulating hard assets at a rapid clip for several years. Among this year's biggest deals, CNOOC (ticker: CEO), China's largest offshore oil producer and one of its most powerful state-owned companies, is spending $2.2 billion for shale acreage in the U.S. owned by Chesapeake Energy (CHK) and $3.1 for 50% of a unit of Argentina's Bridas Energy. State Grid Corp. of China plowed $1 billion into Chilean copper deposits. Sinopec (SNP) coughed up $4.6 billion for 9% of ConocoPhilips (COP) -- and another $7.1 billion for 40% of Repsol's (REP) Brazilian unit.
When China can't buy the business, it buys the underlying commodity. China's Sinofert, after weighing and dropping a bid for Potash Corp. (POT) to counter BHP Billiton's hostile offer, announced last week that it would buy $2.2 billion of the key fertilizer ingredient from Canpotex, the monopoly whose three members include Potash.
Chinas's investments in hard assets are growing quickly. In June, even as the mainland dumped a net $15.6 billion of U.S. Treasury and agency bonds, it also bought $1.1 billion in Canadian minerals and Mozambique coal deposits. 'China is upgrading its industries, and all are very heavy users of these materials,' explains Lu Kang, deputy director general of the Ministry of Foreign Affairs in Beijing.
Adds He Ning, director general of the Ministry of Commerce in Beijing: 'China is starting to make overseas investments as a return to the world. It's just a start.' As such deals become more numerous, says He, 'people will no longer pay attention.'
For now, though, the hard-asset investments are making China a standout. In 2008, even as global investment flows by countries around the world fell by 15%, China's more than doubled, points out Ken Davies, a research fellow at Columbia University's Vale Center for Sustainable Investment. In 2009, when the global flows fell 43%, China's inched up by 1%. Had Chinalco's bid to increase its stake in mining giant Rio Tinto (RIO) not fallen apart, China's foreign investment in '09 would have been up by 36%. And last year, for the first time, China purchased more assets in the U.S. than the U.S. did in China, according to data information provider Dealogic.
For 2010, China's nonbond investments around the world, primarily commodities, should hit $55 billion, says Derek Scissors, a research fellow at the Heritage Foundation who keeps a database of China's investments over $100 million. The foundation's data closely tracks the official data published annually by Beijing's Ministry of Commerce.
At the same time, China's net purchases of U.S. Treasury securities are likely to fall to $55 billion this year from about $100 billion last year, says Joe Quinlan, chief market strategist at U.S. Trust. 'They're just drowning in dollars,' says Quinlan. 'QE2 will make them even less likely to want U.S. paper.'
Much of China's hard-asset investing is by state-owned companies as part of Beijing's industrial strategy; as state-owned operations, they bear an implicit government guarantee. They often take minority stakes because all the check-writing makes people nervous. Says Michael Perkinson, the China expert at Veracity Worldwide, a risk-management consultancy: 'Chinese companies are committed to being very deliberate.' After CNOOC's 2003 takeover bid for Unocal was thwarted by Capitol Hill, 'They feel they've been burned.'
Some of the investments are made by China Investment Corp. and the State Administration of Foreign Exchange Investment Co., both sovereign-wealth funds that are charged with diversifying China's $2.5 trillion in foreign-exchange reserves. After the values of big stakes in Blackstone and Morgan Stanley slid during the financial crisis, CIC reevaluated its strategy, investing last year in commodity companies like Hong Kong's Noble Group, Russia's Nobel Oil, and Canada's South Gobi Energy Resources.
In 2001, Beijing launched its 'zou chuqu' edict for Chinese companies to 'go global' -- to develop world-class brands, diversify import sources, expand export markets, boost competitiveness and reduce low-return currency reserves. The U.S. was the perfect destination: China had massive amounts of dollars and the U.S. had plenty of the types of resources that China needs. Lenovo (0992.Hong Kong), for example, acquired a world-class PC manufacturer from IBM. Relates Andy Rothman, a former U.S. diplomat and the top China analyst at CLSA Asia-Pacific Markets: 'It was frustrating to them that they were driving the growth in demand for resources but didn't have a seat at the table.'
Then came the Unocal debacle in 2005, when CNOOC withdrew a buyout offer after organized opposition from Congress. Reeling, China began a hunt for assets elsewhere around the globe. But Western multinationals had most of the resources tied up. 'The problem is the existing monopoly system is very hard to break down,' says Fan Gang, a prominent Beijing economist and former advisor to China's central bank. 'Being a latecomer is not easy. We were very late, and very cornered.'
That drove China to some of the riskier parts of the globe. It pushed heavily into resource-rich Africa. Beijing pronounced 2006 'The Year of Africa' and began buying up resources there.
It wooed leaders of countries the West might find unsavory. 'In China, there is no concept of a failed state. The Chinese way is to stoke the pace of development,' says Jin Linbo, a senior fellow at the influential China Institute of International Studies in Beijing.
In many African countries, where investment plummeted after the end of the Cold War, China's interest was hugely appreciated. China offered, in addition to direct investment, a mix of cheap loans and infrastructure improvements, export credits, and regular visits by top brass from the mainland.
Industrial & Commercial Bank of China (1398.Hong Kong) -- bought 20% of Standard Bank, the continent's largest financial institution. China financed the presidential palace in Sudan. It built soccer stadiums. 'If you are a typical multinational, you do a one-shot deal. China will build a port, a refinery. China is investing big time in what counts for Africa,' says V. Shankar, CEO for Middle East, Africa, Europe and the Americas for Standard Chartered, the London-based banking company.
Even noncontroversial nations welcomed the People's Republic. Botswana's president famously said: 'I find that the Chinese treat us as equals. The West treats us as former subjects.' All that the mainland asks for, in turn, is that the countries cut ties with Taiwan.
Consider the case of Kosmos Energy's stake in a massive offshore field in Ghana, which state-owned Ghana National Petroleum Corp. and CNOOC offered to buy for $5 billion. Exxon Mobil (XOM) withdrew a $4 billion offer in August, amid signs that Accra favored the Chinese-backed bid. The next month, China Export-Import Bank loaned Ghana $10.4 billion for infrastructure projects; China Development Bank offered another $3 billion loan to develop Ghana's oil and gas sector. Last week, Texas-based Kosmos, which is backed by Warburg Pincus and Blackstone, rejected the CNOOC offer as too low. But observers believe the CNOOC group will keep pursuing it.
China built pipelines across Kazakhstan and Uzbekistan, and began mining for copper south of Kabul. It hopes to build roads and pipelines through Pakistan and Afghanistan. That has U.S. officials seething. 'The Chinese are not particularly concerned about the regime they deal with. They are oligopoly buyers who drive up prices all around the world. In U.S. trade policy, we need to think about the way China is directing its state-owned companies,' says one top U.S. diplomat in Asia.
Less controversially, China invested heavily in Australia, where it is such a large presence that Australia's Foreign Investment Review Board recommends that Chinese ownership stakes stay below 50%. In Australia, Chinese acquirers accounted for 40% of 2009's inbound mining transactions. The mainland has committed to buying 20 years worth of natural gas from Chevron's $37 billion project on Australia's Barrow Island. It already owns 9% of Rio Tinto and has tried to buy more; after that effort failed, it detained a Rio Tinto executive in China for alleged bribery.
Beijing's new five-year plan, to be adopted early next year, will focus on more sustainable growth: higher consumption, lower dependence on exports, increased wages in the interior, more efficient energy consumption. That might 'slow' demand for resources, says Scissors of the Heritage Foundation, 'but they will still have a deficit in commodities and primary products and will invest to protect supply.'
In coming years, China will face more competition for resources from other rapidly developing nations, all of them industrializing and huge owners of dollars. Of the total $8.1 trillion in foreign exchange reserves held by countries in 2009, more than 60% was held by 11 Asian countries., according to Christopher McNally of the East West Center.
'The financial crisis of 2008 encouraged people to make investments in hard assets as opposed to U.S. Treasuries,' says Colin Banfield, head of Asian mergers and acquisitions for Citigroup in Hong Kong. 'There's a desire to spend reserves on actual businesses rather than holding the currency.'
Thanks to its resource purchases in Africa, 'China has leapfrogged India by a quarter mile,' says Shankar of Standard Chartered.
The appreciating yuan also means buying abroad will be easier. CLSA Asia-Pacific Markets says that a rate of five yuan to the dollar, versus 6.65 today, would reduce 'economic distortions,' and help create a consumer economy: China's market would suddenly become 33% larger. At that rate, CLSA predicts, China's 'reserve accumulation and consequently its official purchases of U.S. Treasuries will slow to a tiny fraction of the current pace.' Manufacturing in China gets less attractive; factories in the U.S. become more alluring.
Already the world's second-largest economy, the mainland is expected to have more than 350 million middle-class households in the next decade. Imagine what that means for future commodities prices.
China is now the world's largest consumer of copper, tin, steel, coal, aluminum and seaborne iron ore, and the second largest consumer of oil. And investors are betting on an array of companies they think will benefit. At T. Rowe Price, that includes companies like Freeport McMoran Copper & Gold (FCX), the largest publicly traded copper producer, Peabody Energy (BTU) and Joy Global (JOYG).
'The reality of the situation is everything you touch in commodities is affected' by China's hearty appetite, says Rick de los Reyes, who follows the materials industry for T. Rowe Price.
'In some ways, China has the most perfect information, because much of what's driving commodity prices higher is Chinese demand,' says Shawn Driscoll, an energy specialist at T. Rowe Price and keen observer of the mainland's movements around the globe. 'The Chinese government knows what their needs are long-term. From my perspective, they are the most informed buyer.'
For the U.S. Treasury market, that may not be such a good thing.
Leslie P. Norton
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