World Bank discusses investing in Africa with China Investment Fund

BEIJING — World Bank President Robert Zoellick said he is talking to Chinese government officials about cooperating on investments in Africa, which he said could help boost the continent’s economic growth.

Mr. Zoellick told reporters Wednesday during a visit to the Chinese capital that China Investment Corp., the nation’s sovereign-wealth fund, has expressed interest in investing in the World Bank’s recently launched asset management company, which invests private-sector funds into places like sub-Saharan Africa and Latin America.

World Bank President Robert Zoellick
On Wed, stated he will press Group of 20
for more aid to developing countries [WSJ]

“CIC expressed interest in this as a commercial investment vehicle, but obviously there is no decision yet on their part,” Mr. Zoellick said. Other sovereign-wealth funds and pension funds are also interested in the new investment vehicle, he said, which manages some $4 billion in funds.

Click here to read J.R. Wu and Andrew Batson’s complete article at the WSJ

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China’s Policy Paper on Latin America and the Caribbean – MercoPress Analysis

[Source] — MercroPress

On November 5, 2008, the Chinese government released a policy paper on Latin America and the Caribbean, as it had previously done so for Europe in 2003 and for Africa in 2006.

Although it may not come as a huge surprise that Latin America is the most recent region for which China has formally spelled out its foreign policy position, the region has been historically perceived as being under the United States’ sphere of influence. Perhaps the importance of the Chinese policy paper lies in the timing of its release. The release of the paper deliberately coincided with the unfolding of the current financial crisis; this congruence of events has allowed China to expand its influence in this somewhat neglected region without attracting any lasting venom from the U.S. China’s policy paper formally evidences the importance of Latin America and the Caribbean as part of China’s growth plan for its long-term strategic interests. Most of all, this includes access to raw materials as well as a plethora of natural resources, the infiltration of new foreign markets, the reduction of diplomatic support for the Republic of Taiwan, and the strengthening of Beijing political standing on the global stage through strong alliances cemented with the developing world.
The policy paper’s general context

The policy paper explicitly states its main objective is to “clarify the goals of China’s policy in this region, outline the guiding principles for future cooperation […] and sustain the sound, steady and all-around growth of China’s relations with Latin America and the Caribbean.” In the economic realm, China expresses an interest in investing in energy, mineral resources, forestry, fishing and agriculture, areas important to expanding China’s productivity. Additionally, the Chinese government seems to show interest in infrastructure projects not directly related to its economy, albeit essential in the transportation of natural resources, and proposes to fund these projects in order to be perceived as a partner in development. Furthermore, China expresses its desire to increase military diplomacy and sale of equipment to the region. Although many of the report’s statements are merely rhetoric and general in scope, the paper helps formalize China’s economic, diplomatic and military ties with Latin America, which were first proposed by then President of China Jiang Zemin in 2001.

The policy paper was released against the backdrop of the current financial crisis and the corresponding economic hardships that have severely hit the U.S. and Europe. Its publication deliberately coincided with the emergency G-20 meeting to discuss the economic crisis that was about to take place in Washington. More importantly, it preceded Chinese President Hu Jintao’s visit to Peru for the November 2008 Asia-Pacific Economic Cooperation (APEC) summit, at which he presented China’s foreign policy towards Latin America. This timing of the paper’s release was especially important for the countries seeking to diversify their export markets and decrease their dependence on declining Foreign Direct Investment (FDI) from the US and Europe. With the vast foreign reserves accumulated by China –which totalled US $1.95 trillion in December 2008– the region had valid reasons to closely follow the summit’s developments.

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China’s ethnic regions also home to abundant mineral wealth

Two articles grabbed my attention from Chinamining.org this morning. They both relate to the fact China’s ethnic regions also happen to be home to a great proportion of the countries commodity and energy wealth.

You can click on the titles of each respective article to access the stories in full from Chinamining.org.

–> Tibet has copper ore reserves of 30 mln t, half of China’s total

Southwest China’s Tibet Autonomous Region has geological copper ore reserves of more than 30 million tons, accounting for over a half of the country’s total, according to the region’s geological prospecting bureau.

The bureau director said that Tibet is the largest region in China by its copper resources reserves. By 2008, 329 copper ore deposits had been found in the region, including 11 large deposits and six mid-size ones. Its Qulong copper ore mine, the largest one in Asia, is estimated to possess copper reserves of more than 10 million tons.

Tibet – Potala Palace
[Photo I personally took during a trip I made to
the region in December 2006, Bennett A. Reiss]

–> 1st Kunming Mining & Cooperation Forum (Sept 2-4, 2009)

Entering the 21st century, the global mining industry is writing a new chapter. It is an era of resource economy. Mining market becomes more open and capitalized. Mineral exploring as well as financing becomes more diversified.

Yunnan is rich in natural resources, known as “the Kingdom of non-ferrous metals”. More than 150 kinds of minerals have been proved there, accounting for 92.6% of Chinese total. Among the proved 92 minerals, 9 of them have the largest reserves in China and 21 of them are listed within top three. Mining as one of the five pillar industries in Yunnan plays an important role in the development of the local economy.

Earlier this summer another ethnic region grabbed world headlines. Does the region of Xinjiang ring any bells? Xinjiang is home to a large number of China’s ethnic Muslims, is culturally quite similar to other republics in central Asia and is often referred to as East Turkestan. Xinjiang is also on track to become China’s most important oil and gas producing region.

This article, “Xinjiang’s oil and gas equivalent ranks first in China” is from little over a year ago (July 2008), asserts that Xinjiang has already passed Daqing (China’s other oil producing region) as the number region in oil and gas output.

As one hand seizes development, the other taps into the potential to allow Xinjiang’s oil output to soar. The latest statistics show that Xinjiang’s annual oil and gas equivalent output has already exceeded that in Daqing and ranks the first in the country.

The third national resources evaluation shows that: Xinjiang’s total oil and natural gas resource reserves exceeded 30 billion tons. Although it is rich in resources, Xinjiang still requires development and a reduction in consumption. Recently, Xinjiang has been producing 75,000 tons of crude oil daily, occupying 14.4 percent of the country’s daily crude oil output. In 2007, Xinjiang’s oil and gas equivalent reached 44.94 million tons, and ranked at the top.

In all likelihood, the development of commodity sectors in these regions will be controlled by Beijing…not locals. What industries can these regions develop as to diversify their economic development from commodity sector led growth?

Yunnan and Tibet have great potential for becoming tourist meccas in China. Yunnan, the less politically sensitive of the two, has already emerged as one of China’s most popular tourist destinations.

Furthermore, Yunnan’s strategic location in SE Asia put it in a good place to be at the center of the future growth of trade and exchange between China and the countries of Vietnam, Myanmar and Laos.

[Map courtesy of leafgovso.co.uk]

Tibetan tourism is growing as well, but remains inhibited by the sporadic changing of restrictions and the need to acquire a special internal visa or permission to visit.

When analyzing this situation from a the perspective of the people in the Chinese government determining domestic policy, China can not and will not simply let three of its most resource rich regions control the development their natural resource industries.

Sad as it may be for some members of the minority groups in these regions, one thing is sure–Xinjiang, Tibet and Yunnan are all going to remain integral pieces of China for a long time and be subject to increased inflows of ethnic Han Chinese seeking economic opportunities.

Let me clearly state, the opinions expressed in this analysis not reflect how I the author, (Bennett A. Reiss) feel on a personal level. Allow me to try to put things into perspective with two analogies which I feel help explain the Chinese point of view.

Canada is full of resources from top to bottom. I am by no means an expert, but I highly doubt the Eskimo and Native American populations have much say about development of Canadian mining and energy companies in their ancestral territories.

Likewise, a more mainstream analogy might be the US in Iraq. To the “logic” driven Chinese bureaucrat, China is far more justified in their domestic policy towards these resource rich regions than the United States is in Iraq. On the surface the US is subjugating a foreign population in a country half way across the globe from its own territory. China in its own official opinion is not subjecting anyone, and to further add to the Chinese argument, these regions have been a part of China for centuries if not thousands of years.

Even if your feelings on the war in Iraq produce other rationalizations for the US invasion (outside of oil), try to justify this to a country with over 1.4 billion people to feed and improve the lives of.

I welcome debate in this area to any readers who would like to discuss this topic further.

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Newswire: China and Commodities in focus

China stops expansion projects in steel industry for three years – Xinhua

China’s Ministry of Industry and Information Technology (MIIT) Thursday announced a three-year moratorium on approvals of new expansion-related proposals in the iron and steel industry, as the government pledges to eliminate outdated capacity.

CISA stance hurts small steel mills – China Daily

China’s top negotiators in the bitter and protracted row over the price of iron ore seem destined never to agree – risking a loss of face that will raise questions about whether they are up to the job and who it is they are actually representing.

Their apparent refusal to compromise is damaging the competitiveness of smaller domestic steel mills, forcing them to buy from their larger counterparts, say analysts. The bigger firms have been content to pay whatever the spot price is for ore and pass on the premiums.

CNPC to speed up oil assets buy plan – Xiao Wan of eChinaCities

China National Petroleum Corp (CNPC), the country’s largest oil and gas producer, will speed up overseas acquisitions in regions such as Africa and South America this year, in a bid to boost China’s quest for energy security.

Coal mines to merge in new plan – China Daily

A large-scale restructuring of the coal industry in China’s major coal-producing province of Shanxi, starting at the end of this month, will reduce accidents and improve efficiency by shutting down small coal mines, officials said.

“The restructuring this time is the largest after years of adjusting the coal industry’s structure,” Miao Huanli, planning section director of Shanxi provincial coal bureau, said yesterday.

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Chinese Oil Firms Bid for Repsol’s Argentine unit

Chinese oil conglomerates China National Petroleum and Cnooc have offered to pay an estimated $17 billion usd for all of Repsol YPF’s state in its Argentine unit called YPF.

You can read the Wall Street Journal’s paraphrased article (the original costs money) at thestreet.com, by visiting this article.

Will this deal actually be completed? China South America reported on this possible deal back on July 7, 2009. You will notice, the offer at this point was only $14.5 billion for a 75% stake. China has since upped the offer and is now looking to buy the entire thing.

Why China? Are you angry over Australia rejecting your Rio bid? Are you feeling flustered that countries from the industrialized world, but also in Africa and Latin America are starting to think twice about selling the rights to their raw materials?

I don’t blame them, after all, Australia is quite similar to South American commodity producing countries. Two note worthy and simple similarities include

1. A large portion of GDP is generated from commodity exports
2. The relative strength or weakness of domestic currencies such as the Ausie Dollar, Argentine Peso, Peruvian Sol and Brazilian Real, are all inherently linked to the global market price of the commodities the countries export. [ie: if the spot price for copper drops 50%, observe what happens to Peru and Chile’s Peso’s.

According to the WSJ article, the main obstacles to this deal include

• Spain is hesitant to see some of its best assets in Argentina be sold to China

• Argentina’s government has no financial stake in YPF, but nonetheless under Argentine law has the right to veto decisions such as transfer of ownership. In my personal opinion, this translates into who is willing to pay more “under the table” to the Argentine government.

• China National Petroleum and Cnooc are state owned organizations. Despite their growing influence and presence in oil markets around the world, many governments still remain weary of doing business with companies officially tied to a foreign government.

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China’s currency reserves may top $2 trillion

Now where is China going to put $2 trillion USD? Well according to
this Bloomberg article (see excerpt and a link to the complete article
below), China still plans to purchase US treasuries. However, if
China’s recent foreign policy and international investments tell the
world anything, it is that the total dominance of the US dollar as the
world’s currency is slowly coming to an end. This won’t happen over
night, and the US dollar will probably remain a big player for some
time, but eventually China wants to find new places to park its money.

Here’s a small except. See link below for the complete article from Bloomberg.

China’s foreign-exchange reserves probably topped $2 trillion for the
first time, drawing attention to the difficulty the government faces
in finding places to invest the world’s largest holdings.

The reserves climbed $67.8 billion to $2.022 trillion as of June 30
from three months earlier, according to the median estimate of six
economists surveyed by Bloomberg News. That would compare with a $7.7
billion gain in the previous quarter. The central bank may release the
number today or next week, based on the timing of previous
announcements.

Central bank Governor Zhou Xiaochuan ruled out any sudden change in
the management of the reserves last month after proposing that
governments investigate setting up a supranational currency. Premier
Wen Jiabao is concerned that China’s $763.5 billion of Treasury
holdings may fall in value as the U.S. sells record amounts of debt to
fund stimulus spending.

“There’s no obvious alternative for China to U.S. Treasury bills,”
said Stephen Green, head of China research at Standard Chartered Plc
in Shanghai. “The alternatives are limited for that much money.”

China’s reserves more than doubled in two and a half years as the
trade surplus pumped cash into the economy, fueling claims that the
nation’s currency is kept artificially low to help exporters. The
International Monetary Fund may describe the yuan as “substantially
undervalued” in a pending report, according to a person who has seen
the draft.

Bloomberg article:
http://www.bloomberg.com/apps/news?pid=20601080&sid=acAzOqr9lvKA

—
Sent from my mobile device

Benito
International Trade Consultant
Mir Global Marketing LLC
http://www.mirglobalmarketing.com
http://www.chinasouthamerica.com

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China to buy Repsol Assets in Argentina – Update

[China – Argentina – Spain]

China’s CNPC said offering $14.5 billion for Repsol investment – Market Watch

SAN FRANCISCO (MarketWatch) — China National Petroleum Corp. has offered up to $14.5 billion for a majority stake in the Argentine unit of Spanish oil company Repsol YPF SA, according to media reports published on Tuesday.

The South China Morning Post, citing unnamed sources, reported that CNPC has offered between $13.2 billion and $14.5 billion for a 75% stake in the unit.

Dow Jones Newswires reported that Repsol said last week that it had received proposals from a number of companies for a stake in the unit.

China has been acquiring energy assets as its growing economy demands more resources to support its needs.

Sinopec has also secured a deal with Brazilian firm Petrobras (PEFGF) to supply it with 150,000 barrels of crude a day this year, and 200,000 barrels per day for nine years starting in 2010, according to the state-run China Daily.

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Argentina and Spanish oil giant Repsol still thinking…

[China – Argentina – Spain]

Pretty good Wall Street Journal articles hit the presses in NYC today relating to the topic of Repsol selling their assets in Argentina to China

CNOOC Says Interested In Cooperation, Not Takeovers – EFE

Argentina Still Weighs on Repsol

Repsol is playing down speculation about unloading some of its 85% stake in Argentinian oil business YPF. But shareholders must hope a deal materializes, and soon. Apart from its exposure to Argentina’s political and economic risks, YPF ties up capital that Repsol could use to develop large recent Brazilian oil discoveries.

Unfortunately, what makes it wise for Repsol to sell YPF may deter potential buyers. YPF’s reserves are declining. Buenos Aires has to approve any share sale, while Repsol has committed to keep at least a 50.1% stake until 2012.

YPF also has to satisfy domestic oil demand — where prices are capped — before it can export, paying a punitive export tax. Chinese suitors, in particular, will likely bridle at such restrictions.

Click here, or the links above to view the complete articles from the WSJ

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Newswire: China South America

[Peru – China] — Peru, China relations “at best moment”

Chinese ambassador to Peru, Gao Zhengyue, said that relations between his country and Peru “are at their best moment” in history.

According to him, both countries have deepened the confidence in the political, economic, technological educational, cultural, tourism and justice areas, among others.

The Chinese diplomat noted the increase of the economic, trade flow and bilateral investments, and highlighted the increase of the Chinese investments in Peru, with over seven billion dollars.

“I am convinced that with joint efforts the relations between our two brotherly countries will enter a new stage of development and reach a higher level in the two peoples’ benefit,” said Zhengyue.

[Latin America – China – Africa] — China’s new frontier

Chinese telecom-gear makers Huawei and ZTE have already conquered Africa and Asia. Next stop: Latin America.

(Fortune Magazine) — At phone operator Movistar’s sales offices in Buenos Aires, customers line up to buy high-speed wireless services to access the web on their mobile phones. Most Argentines don’t realize, though, that the company providing the gear for their broadband connections isn’t a longtime supplier to Latin America like Alcatel-Lucent, Ericsson, or Motorola, but a relative newcomer called Huawei.

China’s telecom suppliers are coming to the Americas. Pursuing the same formula they’ve used to win business throughout Asia and parts of Africa (selling cheap gear in low-income countries), equipment makers Zhong Xing Telecommunication Equipment (also known as ZTE) and Huawei are now getting a foothold in countries such as Argentina, Chile, and Colombia. Says Leandro Musciano, project director at Movistar Argentina, a unit of Spain’s Telefónica: “Price is important.”

[Caribbean – China] — China’s expanding relations with Latin America and the Caribbean

Commentary
By Odeen Ishmael

The recent visit of Brazil’s President Luiz Inacio “Lula” da Silva to China in May 2009 reflected the Asian nation’s expanding economic and political influence in Latin America and the Caribbean (LAC). One year ago, the Brazilian government had announced that China would surpass the United States as its major business partner. The results of da Silva’s visit verified this after the two nations signed 13 agreements, including a $10 billion loan from the China Development Bank to Brazil’s state oil company Petrobras. Petrobras also concluded a deal with a subsidiary of China’s oil refiner Sinopec for the export of crude oil. A major commercial agreement will also see the beginning of huge poultry exports to China.

Brazil’s two-way trade with China, one of the few economies still growing despite the global crisis, reached US$3.2 billion in April, surpassing the $2.8 billion trade total with the US. So far this year, Brazilian exports to China grew 65 percent over the same period in 2008, rising from $3.4 billion to $5.6 billion.

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Newswire: South-South Cooperation, China in focus

[China – Africa] — China’s New Silk Road shines in Africa
The word “China” has echoed in the meeting halls of the ongoing three-day World Economic Forum on Africa, reflecting the close attention to the Asian country which is widely regarded as Africa’s crucial partner in the strive against global economic crisis and future development.

The issues related to China have become hot topics in the platform which attracted over 800 participants from 50 countries and five African leaders in a bid to seek practical solutions to foster better business practices and greater investment across the continent, under the theme of “Implications of the Global Economic Crisis for Africa”.

[China – Africa] — ICBC chief says China to increase investment in Africa
Chief of China’s major bank ICBC, Jiang Jianqing, said on Thursday that he believes China will continue increasing investment in Africa which is mutually beneficial.

“With the development of economic globalization, China will have more and closer business links with the rest of the world, which will finally lead to increasing oversea investment from China. Therefore, I believe more investment with mutual benefits will come to Africa,” said Jiang in a joint interview with Jacko Maree, group chief executive of the Standard Bank Group.

[China – Afghanistan] — China, Afghanistan vow to advance bilateral partnership
The foreign ministers of China and Afghanistan met in Beijing Thursday and agreed to boost cooperation.

“China and Afghanistan are traditional friendly neighbors” who share mutual respect and support, said Chinese Foreign Minister Yang Jiechi in a meeting with Afghan Foreign Minister Rangin Dadfar Spanta.

[China – Kazakhstan] — Chinese parliamentary delegation visits Kazakhstan
A Chinese parliamentary delegation visited Kazakhstan from June 9 to June 12 at the invitation of the Kazakh parliament.

[China – North Korea] — Senior CPC leader calls on closer media co-op with ROK
Senior Chinese leader Li Changchun on Friday called on media organizations from China and the Republic of Korea (ROK) to offer more news reports that conducive to cementing bilateral strategic and cooperative partnership.

Hailing fruitful media cooperation between the two countries, Li hopes press organizations take the opportunity of the dialogue to set up a regular exchange mechanism, and provide more news reports and information that help boost Sino-ROK strategic and cooperative partnership.

[China – Pacific Island Countries] — Pacific parliamentary delegations to visit China
The five delegations will be led respectively by Isaac Figir, Speaker of the National Congress of the Federated States of Micronesia; Tu’ilakepa, Speaker of the Parliament of the Kingdom of Tonga; Manu Korovulavula, Chairman of the Public Accounts Committee in Fiji; Billy Talagi, Chairman of the Bills Committee of the Parliament of Niue and Lino Bulekuli Dit Sacsac, Clerk of the Parliament of the Republic of Vanuatu.

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