Thursday, September 24, 2009

The Chinese are coming!

Recently there have been a spate of headlines that suggest that the Chinese continue to show a high degree of investment interest in resources. Here are just a few examples:

These stories are anecdotal and suggest that China understands that she is commodity short and is trying to gain long-term control of supply. But stories don’t tell the whole picture. Analysis from the Center for Geoeconomic Studies gives us a better picture of China’s external investment weights:

This chart, along with their announced direct investments, seems a lot like the effects of a long-term investment policy that doesn’t change easily. Many of the announced investments are of the FDI (foreign direct investment) variety, which cannot be sold easily like a stock holding.

While there are some indications that China may be pulling back on their commodity demand in the short-term, don’t mistake tactical decisions with the long-term strategic picture.

As long as China is growing, it will mean a secular friendly environment for commodity bulls.

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