Friday, February 20, 2009

Shopping spree

$2 trillion in what should one do??

Go shopping of course!! because only if an entity with such huge savings goes on a shopping spree can the world have something to cheer about.

But instead of terming "shopping", if it translates into "investing" it would make much more sense for both the consumer and the producer in the long run.

China with huge forex reserves has started its strategic acquisitions in this downturn where the commodity prices have gone down tremendously. Till recent times when people resented investments from China because of the negative image about them, but everyone is welcoming them with open hands. Obviously anyone would latch onto any country/person willing to extend capital in these very tight credit times.

China has spent $41 billion in last week alone..some of the things in its shopping list are:
a) Venezuela received a $6 billion loan from China and agreed to increase its oil exports to China
b) China Minmetals Corporation bid $1.7 billion to acquire Australia’s OZ Minerals, a huge zinc mining company. This is also a strategic acquisition considering the huge appetite of ores and minerals to support its high growth rates.
c) In Brazil, China signed a $10 billion “loan-for-oil” deal that guarantees the country up to 160,000 barrels a day at market prices.
d) China agreed to loan Russia’s struggling oil giant, Rosneft and Russia’s oil pipeline company, Transneft, $25 billion in exchange for 15 million tons of crude oil a year for 20 years.

Though japan has highest forex reserves, the country is in a dire situation considering the fact that its internal consumption can never achieve the levels that would support its supremacy. China on the other hand can generate enough internal consumption to sustain high growth rates and at the same time continue to flourish. I wish India can also come up with some actions that everyone can look up to!