-- Posted Monday, 26 May 2008 | Digg This Article
| Source: GoldSeek.com
By: Malcolm Bucholtz
This past week-end I had a most unique experience when I had the chance to meet a visiting delegation of Chinese investors who had come to the Province of Saskatchewan in Canada to seek out resource based acquisitions.
One question I levelled at this group had to do with the China-US trade deficit. I pointed out that up until recently, China had been a big buyer of US Treasuries which had the effect of keeping interest rates down in the US. But, this only exacerbated the trade deficit situation. I inquired whether China would consider "dumping" its US Dollars in favor of Gold, Euros or other currencies. The answer shocked me. Without batting an eyelash, the spokesman for the group told me that China intends to use its stash of US Dollars to buy up hard, physical resources in North America so as to ensure that China has a good supply of commodity resources to last well into the future. I think we are about to witness the biggest transfer of wealth in the past 100 years. We are all going to wake up one day in the not so distant future and find that we do not own any of our own resources. We will come to this reality as we drink our morning coffee brewed from beans grown in a Chinese owned coffee plantation in Brazil, get dressed in our suit made in China and get into our Chinese made car to drive to our place of work now owned by a Chinese firm.
Another question I posed had to do with food. They were quick to point out something that we often overlook. In the south of China, the climate is hot and humid and the land capable of producing 2 or 3 crops a year, providing enough potash fertilizer is added to the soil. Here in North America we typically take off only 1 crop per year. In the north part of China, the terrain more closely resembles what we have in North America. But, China is looking at ways to run water pipelines to this part of the country so as to enhance agricultural output. So, there will not be a famine in China, nor will China force food prices to unbearable heights.
On the topic of Gold, I was told proudly that right now China is the world's #1 gold producer with South Africa sitting at #2. But, the reserves of Gold remaining in the ground in China is not significant. Hence China will be going on an acquisition hunt for gold mines and near-to-production gold stories around the world. Keep your eye on this theme....I expect it will make for some interesting trading opportunities.
Lastly, I asked what would happen if North America slipped into recession. I was told in no uncertain terms that this is not viewed as a concern. Firstly, Asia as a whole is demanding more consumer goods all the time and this will help offset any drop in demand from North America. But, more importantly, if the economy slows people will forgo higher end more expensive goods in favor of lower end goods sold at...you guessed it - WalMart and manufactured in.....yes you guessed it again - China. So while we fret and worry here in North America about recession, the Chinese remain calm, cool and collected.
For me, this chance to spend a day with this delegation was an eye opener. If I can offer readers of this blog one piece of sage advice - enrol your kids in Chinese language lessons...now!! And while you're at it, see if you can find some Chinese lessons for adults too....
Malcolm Bucholtz ( a.k.a. "Meridian" ) is a former stockbroker and commodity trader from Canada with a talent for both technical and fundamental analysis. Each week through his writings, Malcolm makes it a point to give the best possible information to his readers; information that has proven very profitable to those that have acted on it. When not writing, Malcolm consults to the small cap mineral exploration sector. He is also a principal in Atlanta based Brookhaven Advisors.
-- Posted Monday, 26 May 2008 | Digg This Article | Source: GoldSeek.com
