• Chinese Companies Embark on Shopping Spree in Euro (WSJ)

Category: Digital Media, M&A

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10 Responses to “China’s European Spending Spree”

  1. Petey Wheatstraw says:

    If the Fed lets strong dollars held on foreign balance sheets return home to buy devalued assets, China’s Euro purchases will seem trifling.

  2. sihaque says:

    this idea has been mentioned so often. so what keeps this money abroad?

  3. RW says:

    AFAIK there are no capital controls in the US and no restrictions on repatriation of dollars from abroad (except those of domestic corporations who have been avoiding US taxes via putative foreign operations).

    That is not the case in the developing world, China being an excellent case in point, where an increasing stock of dollars is required to maintain capital controls and currency peg, sterilize import profits and suppress inflation.

    As far as Chinese investment in European equities goes, it would appear to be poorly timed, but they also have a stock of Euro’s and it may be that they expect the value of those to fall faster than stock prices? Don’t have a clue on that one.

  4. Petey Wheatstraw says:

    It’s true China needs us almost as much as we need them.

    Nonetheless, they’re sitting on a buttload of dollars that will eventually be repatriated. They won’t be coming after labor or products. That leaves companies, intellectual property, and natural resources. If those returning dollars are strong, it will kill us.

    They can’t be happy about QE I and II. If the Fed is forced into QE III (as if they aren’t already fully committed), it will be interesting to see what China will do as it’s holdings and to an extent, its own currency, are further devalued. If the Fed tightens, all hell breaks loose — markets decline, credit stops, and any hope for recovery in housing or employment is dashed. If I was China, I’d hold until the Fed started tightening and would start buying America like crazy.

  5. RW says:

    “It’s true China needs us almost as much as we need them.”

    I’d flip this on its head: China needs us more than we need them but we are indeed tied together; e.g., we could burn them to the ground with a single currency devaluation and they know it but it would cost us at a time when we are unwilling to endure cost and they know that too.

    China is facing problems every bit as dangerous as we are and, if this was the America of 1941 rather than now, China would be doing everything to convince us we were pals.

    Shorter version: China doesn’t have the option to hold or not; the ante’s in, the pot is good and they either can either bet or fold …except they can’t fold.

  6. socaljoe says:

    Makes sense to me. If I were getting paid in dollars, I would turn around and use the dollars to buy real assets instead of US government debt. Who would want to own dollars when they’re being printed by the trillions or US debt with a negative real yield?

  7. farmera1 says:

    China is a very busy little beaver. Pursuing natural resources all over the globe. Africa, Canada and in their own neighborhood. They are using the approximately one trillion in US dollars they hold to buy what they can and they are also pursuing a more un-business like approach. They have rumbles going with Vietnam and the Philippines over maritime claims.

    VIETNAM WELCOMES INTERNATIONAL HELP AS SEA DIAPUTE ESCALATES (with China)

    http://in.reuters.com/article/2011/06/11/idINIndia-57640220110611?rpc=401&feedType=RSS&feedName=worldNews&rpc=401

    It does appear to me the US is following the devaluation path to deal with the excessive US debt(debt that can never be repaid is my definition of excessive sovereign/US debt). But the US is vulnerable here, one should never piss of their banker. But on the other hand the old saying goes (paraphrasing), owe the bank ten thousand dollars is your problem, owe the bank $10,000,000 is the banks problem. We owe China or the bank in this case, roughly a trillion.

  8. farmera1 says:

    China warns U.S. debt-default idea is “playing with fire”

    http://in.reuters.com/article/2011/06/08/idINIndia-57573120110608

  9. Greg0658 says:

    outgoing DefenseSec Gates calling for more foreignNATO power(cash) into the MIC .. I should start looking at where China is in that game besides hitting eyes in the sky .. whos watching that open nuke pool in Japan

  10. Marc P says:

    What a sensationalist piece of crap journalism. I expect better from WSJ.

    WSJ says China amassed $2700 billion in savings, but the list shows a corporate acquisition total of less than $30 billion over three years. $30 billion (one-third in a single company) is a “Shopping Spree?” Since when is $10 billion per year a lot of money for an economy that size?

    For comparison, remind me, what was the total of Wall Street bonuses over the last three years?

    The other criticism of this article is the Duh factor. If a person, company, or country amasses large sums of profit, that money is going to get invested. Duh. Why is this a surprise to the WSJ?

    From a competitive POV, the U.S. should be happy that China is spending $30 billion on mining, manufacturing and food companies. If China spent a chunk of that $2700 billion on startup funding for tech companies and education of engineers we would be in real trouble. Oh, wait a minute…