China

China Moves

Watson's Web
August 7, 2009

China is moving around the world to get hold of critical resources.

When China's biggest oil company signed the first post-invasion oil field development contract in Iraq last year, the deal was seen as a test of Iraq's willingness to open an industry that had previously prohibited foreign investment.

One year later, the China National Petroleum Corporation has struck oil at the Ahdab field in Wasit Province, southeast of Baghdad. And while the relationship between the company and the Iraqi government has gone smoothly, the presence of a foreign company with vast resources drilling for oil in this poor, rural corner of Iraq has awakened a wave of discontent here.

"We get nothing directly from the Chinese company, and we are suffering," said Mahmoud Abdul Ridha, head of the Wasit provincial council, whose budget has been cut in half by Baghdad in the past year because of lower international oil prices. "There is an unemployment crisis. We need roads, schools, water treatment plants. We need everything."

The result has been a local-rights movement — extraordinary in a country where political dissent has historically carried the risk of death — that in the past few months has begun demanding that at least $1 of each barrel of oil produced at the Ahdab field be used to improve access to clean water, health services, schools, paved roads and other needs in the province, which is among Iraq's poorest. - AINA

Stories like this simply will go underreaported by U.S. outlets because the Big media will not criticize China, because of lucrative media licencing it has or desires to obtain in the large and growing Chinese market. In short, they have been bought off.

China is now obtaining what can only be described as the new world currency. It is stockpiling this currency for the dark days ahead with the dollar comes a tumbling down and nothing else can take its place. What is that new currency?

China, holder of the world’s largest rare-earths deposits, may build a strategic reserve in Inner Mongolia, strengthening its control over materials used in technology ranging from iPods to guided missiles.

Inner Mongolia, which contains 75 percent of China’s deposits, is in talks with the central government to build stockpiles to support prices, Zhao Shuanglian, deputy chief of the province, said at a press conference today in Beijing.

China, which imports most of its iron ore, oil and copper, is tightening control over supplies of rare earths, a range of more than 15 elements such as scandium and lanthanum. Shares in Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., the main producer in the province, surged 7.6 percent in Shanghai trading today after Zhao said the company will take over smaller rivals to consolidate the industry.

“The plan of building a national reserve stockpile is part of a government-level strategy to protect the resources of rare earths and prevent it from being sold cheaply,” Liu Minda, analyst at Huatai Securities Co., said by phone from Nanjing. - Bloomberg

This is no 'conspiracy theory;' this is better called 'Central Planning.' The two phrases often get mixed up in the minds of those who only read U.S. government pronouncements and can't think clearly or never planned for a rainy day... like most Americans.

China is busy building her reserves for a future she knows is certain. Now, China has become a net seller of U.S. Treasury debt.

Just a few days ago, the U.S. Treasury Department revealed that China actually REDUCED its note and bond holdings by $25 billion in June. Although China did NOT sell shorter-term Treasury bills — and isn't expected to — it's still the largest amount of Treasuries China has ever sold in a single month.

This is a huge development:

* In 2006, China and Hong Kong accounted for more than 50 percent of the increase in the amount of Treasury debt sold to the public …

* In 2008, their share had fallen to 22 percent as the U.S. government increased its public debt by a record $1.2 trillion …

* In the first half of THIS year, China and Hong Kong acquired only 9 percent of the more than $800 billion worth of Treasury bonds that were sold — and now …

* In June, China became a net SELLER of U.S. Treasury notes and bonds!

Regular readers of Watson's Web are not surprised; in fact, many of you are wondering what took them so long. First, the Chinese are not stupid. They know they are now in the driver seat and will now drive the car as fast or as slow and in whatever direction they choose to; and if it is other desire to crash the car, they now have it in their power. It is far wiser for them to use those Tresuries to obtain the 'New World Currency' and stockpile it in places like, oh say... Mongolia.

Don't expect the Chinese to crash the car anytime soon, but rather let them allow the U.S. to dig its own grave while they stockpile those things it needs to keep its economy going and that they can barter with when dollars are no longer accepted in international markets.

Don't expect your policy makers to see the light; and if they do, it will only be to save themselves — they have no plan to save our nation. Rather every indication and evidence shows that some are clearly helping the Chinese along with their plan on becoming the worlds dominant economic power.

September 8 Update:

But wait there is more. I was too lazy to post this part yesterday (it was a holiday), and I was going to do a longer piece on this later, but here is a preview now. I thank a loyal reader for passing on some of these links.

A Financial War Going On Derivatives Markets (a great video that explains things for the average Joe.)

For those of you who hate Video's, here is some text from a couple of blogs.

The South China Morning Post published an article today that has caused quite a stir. It seems that Beijing and global investment banks are involved in a dispute over significant losses China’s state-owned airlines have suffered on oil futures contracts.

The central government and foreign banks are threatening legal action against each other in an escalating row over ballooning losses racked up by state-owned airlines which ran into the red on derivatives contracts.

Air China (AICAF.PK), China Eastern (CEA), and Shanghai Airlines have reported losses of almost US$2 billion since last year on aviation fuel-hedging contracts after taking wrong-way bets on oil prices with their banks.

The article names Citi (C), Goldman Sachs (GS), JPMorgan (JPM), and Morgan Stanley (MS) as banks that regularly sell derivates to mainland companies. It notes that the banks face a serious dilemma. - Seeking Alpha

More here.

It seems China is making some very interesting moves to protect not just their markets but their banks and their own people, something out government is diametrically opposed to doing.

Then there is this most interesting story.

Hong Kong is pulling all its physical gold holdings from depositories in London, transferring them to a high-security depository newly built at the city's airport, in a move that won praise from local traders Thursday.

The facility, industry professionals said, would support Hong Kong's emergence as a Swiss-style trading hub for bullion and would lessen London's status as a key settlement-and-storage center. - Market Watch

People in North America and Europe are used to seeing plenty of advertisements for gold and silver – from opportunists urging people to get rid of their “useless” gold and silver for cash! Clearly this is a bullish indicator for the market, as these companies wouldn't be spending large amounts of advertising dollars to hype “scrap” sales, and then even more money buying the metals if they didn't see the opportunity for big profits.

It turns out that there is also “advertising” for gold and silver in China, too. The big difference here is that it is China's government which is advertising the “opportunities” in gold and silver, and it is urging the Chinese people to buy gold and silver. - Bullion Bulls Canada

But if that is not enough, there is more on this front that does not necessarily have China at the center of it.

The United Nations Conference on Trade and Development said in a report published Monday that the U.S. dollar should be replaced as the world’s standard reserve currency, giving rise to a new global currency managed by an as-yet undetermined financial regulatory organization.

Heiner Flassbeck, director of the conference, told Bloomberg News that changes needed in the world’s financial systems rival the scope of the Bretton Woods or European Monetary System agreements. - Raw Story

But China really is a big player in moves to change the international currency regime. They are concerned over the dollar and are not going to get stiffed by Uncle Scam Sam.

The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy. - Telegraph

My Comment? These articles pretty much speak for themselves and only bolster the things I have been warning my readers about for several years almost (but not totally) alone out here on the net. Granted, over the past two years, people have begun to take these things more seriously, but who was back in 2004-05 when people were cashing out equity out of their houses and buying BMW's? Not very many.

So to my readers, I say this. This trend is pretty much unstoppable. There is not much Uncle Sam can do but try and reflate the bubble or create a new scam for the suckers to fall into. No, dear readers, this is not educated guesswork: Wall Street, with Obama's help, appear to be working on a plan to do to Life Insurance what it did with Mortgages.

Is Obama planning to kill grandma? Probably not, unless grandma is Afghani or Pakistani and the murder weapon is an aerial drone. Or maybe you consider capitulation to private health insurance companies in health care reform an indirect way of killing grandma, given that the true death panels are the ones convened by those companies to deny coverage to, among other people, some grandmas.

But another industry that the Obama industry is busy capitulating to—Wall Street—has figured out another way to profit from grandma's death: securitizing her life insurance. Here's how it works, according to an article in today's New York Times:

Investment banks would give policy-holders cash for their policies, which would then be securitized and bundled as "life settlements" (with fees going to the bundlers), sold, traded, resold—just the way subprime mortgages were. And there are similar possibilities for fraud and conflict of interest as with the complex derivatives that played such a big role in the current financial crisis.

The most striking aspect of this new scheme, though, is that it bets against grandma: "The earlier the policyholder dies, the bigger the return—though if people live longer than expected, investors could get poor returns or even lose money." - Dollars and Sense

Are you ready for what is coming? Don't expect this slow motion tragedy of a President to do anything for you. He has already lined up with Wall Street and Big Pharma against ordinary people and even against any hope of a future for the US economy. He is nothing more than a tool to be used by others. If you don't protect yourself, no one else will.

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