China Will Use Cash Reserves to Buy “Strategic Resources”
January 23rd, 2007Via: Bloomberg:
China, the world’s biggest consumer of coal and metals, will use its foreign exchange reserves to buy “strategic” resources, Vice Premier Zeng Peiyan said.
The government will increase the nation’s purchases of resources for strategic stockpiling when there are “plentiful” reserves, Zeng said in a speech carried on the Ministry of Land and Resources Web site today.
China is seeking to boost returns on its $1 trillion of reserves by buying higher yielding assets and diversifying its investment. Premier Wen Jiabao said last week that regulators will consider more ways of using the cash pile. The nation is building an emergency supply of crude oil and plans to expand that to metals to shield the world’s fastest-growing major economy from supply disruptions.
In the same shoes, it’s what I would be doing. Sitting on trillions in increasingly worthless US script, with more pouring in daily, such a move reduces exposure to fluctuations (negative ones, I might add) in the value of the USD, and, at the same time, China gets something useful in the process.