Since the markets have fallen off their peaks, the Chinese have been investing not only in China, but across the world. With their impressive foreign reserves, they are looking for a way to churn profits for the government and trust funds. The Chinese are now the leading buyers of foreign debt, and the Chinese citizenry is also making global plays. Buying Chinese stocks is indirectly betting on the booming world and international growth.
The Hottest Investments
Though China's investments are growing at a record pace globally, they're still made for the best interest of the Chinese government. Ideally, the country is investing only in areas that the mainland lacks, virtually putting a stranglehold on business across the globe. The various areas that are hot right now are the following:
The Chinese have an appetite for natural resources, but minerals are the top preference. China produces tons of consumer products each and every year that require the basic essential commodities to create. On the mainland, mineral deposits are slim at best; changing prices and plummeting values make these investments a more lucrative long term play. To secure China's position as the global leader in exports and in the production of consumer goods, it must have access to the raw materials of production.
Black Gold: Oil
As the oil market gets pounded by recessionary fears, China has cut back on its oil purchases. However, their long term goals are ultimately to secure enough oil for the mainland. After buying some of the largest producing companies in the world under the PetroChina brand, the countries assures itself access to cheap oil – going as far as putting a price ceiling in effect.
Politically Powerful Debt
Debt is a tool, just like anything else, and China is buying up debt in droves. Owning debts of foreign countries allows the debt holder to dictate international trade and legislation. When foreign countries become too fixated on letting the Chinese fund their liabilities, the government that is borrowing must act in a way that is favorable to the Chinese. The impact of debt holders worldwide was seen in US when the stimulus bill was stripped of its “buy American” policy due to foreign input.
Cheap American Real Estate
Though the government's purchase of real estate is slim, many affluent Chinese investors have descended on some of the United States' hardest hit areas to gobble up cheap homes. Everything is in favor of foreign buyers, including a decent exchange rate and home prices that are well off their highs. Some private companies have even begun offering tours to allow Chinese citizens access to the US real estate market. This comes as both good and bad news for the United States, as new buyers will spur slumping prices, but do very little to help in the long term. In addition, turning over ownership to vital assets always creates an economic problem.
America needs to take notice that making money is about being the creditor or owner, not the debtor. In the interim, investors can capitalize on the hot sectors the Chinese are heating up.