China’s buying spree

on Oct 08 in Economics tagged by Trevor Hicks

Here’s a followup on CNNMoney.com about how China is using its vast reserves of foreign currency that I discussed in August. China definitely is diversifying its portfolio from purely financial assets and debt instruments to real assets and equity stakes.

In 2008, China’s investments abroad doubled from $25 billion to $50 billion. Yes, China still lags the U.S., which, as the world’s largest exporter of capital, invested $318 billion abroad last year. Yet in many ways, China has only begun. And it won’t stop anytime soon.

Though still focused mainly on the natural resources that power its economy, China is now, slowly but surely, broadening its foreign-investment horizons. Both the government and private firms are beginning to look beyond the developing world for assets.

Already the Chinese have bought stakes in foreign banks, utilities, and semiconductor companies. This is a hugely consequential step, both for China and for the global economy.

I think it is pretty clear that the secular trend is for Chinese economy to replace the US as global driver in the coming decades. I guess this probably freaks out some “USA #1″ nationalists but I don’t much care. I think it’s important to recognize the trend, understand its implications and position your individual financial house to profit.