Thread: China On U.S. Buying Spree~PLA officers urge economic punch

One-third of its capital was earmarked for investment abroad

China Goes On U.S. Buying Spree

By Joe McDonald, AP Business Writer
Manufacturing.Net - February 09, 2010

BEIJING (AP) -- China's giant sovereign wealth fund revealed it has accumulated stakes totaling $9.6 billion in major U.S. companies including Coca-Cola, Apple and Goodyear following a buying spree last year.

Most of the stakes are small, reflecting China Investment Corp.'s strategy of avoiding politically sensitive acquisitions. But they highlight its growing presence in global markets as it invests a portion of Beijing's $2.4 trillion in foreign reserves.

The holdings were disclosed Friday in a filing with the U.S. Securities and Exchange Commission that listed shares traded in the United States.

CIC, one of the world's biggest investment funds, was launched in September 2007 with $200 billion in capital to earn a better return on Beijing's reserves. One-third of its capital was earmarked for investment abroad, and the fund has bought minority stakes in mining, oil and financial companies.

The biggest holding in CIC's disclosure is $3.5 billion in Canadian mining company Teck Resources Inc., an investment that was previously announced.

CIC has expanded cautiously abroad, trying to avoid a repeat of the political uproar in Washington that followed state-owned CNOOC's 2005 bid to buy U.S. oil and gas producer Unocal Corp. CNOOC Ltd. withdrew its bid after some U.S. lawmakers complained the sale might jeopardize national security.

The fund has said it plans to be a passive investor, holding minority stakes in foreign companies to avoid arousing political opposition.

That strategy is reflected in its disclosure, which includes small holdings in dozens of companies, including $353.8 million in Visa Inc., $6.3 million in Apple Inc., $9 million in Coca-Cola Co. and $1.4 million in Goodyear Tire & Rubber Co.

It also listed a $1.7 billion stake in Morgan Stanley, which CIC bought in June when the investment bank raised money to repay U.S. government bailout funds. CIC also agreed in 2007 to pay $5 billion for a nontradable 9.9 percent share of Morgan Stanley, but that did not appear in the latest disclosure.

Beijing keeps a big share of its reserves in safe but low-yielding U.S. Treasury securities and other American government debt. But communist leaders worry that they need to earn more to pay for pensions and other social programs in a rapidly aging society where many people still live in poverty.

CIC was the target of criticism at home after the value of some of its early investments in Morgan Stanley and private equity fund Blackstone Group plunged when the global financial crisis hit in 2008.

In its first annual report, CIC said in August it lost 2.1 percent on its global portfolio in 2008 but defended that as a strong performance compared with heavy losses suffered by other sovereign wealth funds.

CIC says it did better in 2009 because it bought assets at lower prices as markets were recovering.

http://www.manufacturing.net/article.aspx?id=240522

Officials in charge of that area have given no sign of any moves to sell U.S. Treasury bonds over the weapons sales

China PLA officers urge economic punch against U.S.

BEIJING (Reuters) - Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan.

World

The calls for broad retaliation over the planned U.S. weapons sales to the disputed island came from officers at China's National Defence University and Academy of Military Sciences, interviewed by Outlook Weekly, a Chinese-language magazine published by the official Xinhua news agency.

The interviews with Major Generals Zhu Chenghu and Luo Yuan and Senior Colonel Ke Chunqiao appeared in the issue published on Monday.

The People's Liberation Army (PLA) plays no role in setting policy for China's foreign exchange holdings. Officials in charge of that area have given no sign of any moves to sell U.S. Treasury bonds over the weapons sales, a move that could alarm markets and damage the value of China's own holdings.

While far from representing fixed government policy, the open demands for retaliation by the PLA officers underscored the domestic pressures on Beijing to deliver on its threats to punish the Obama administration over the arms sales.

"Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counter-punches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease," said Luo Yuan, a researcher at the Academy of Military Sciences.

"Just like two people rowing a boat, if the United States first throws the strokes into chaos, then so must we."

Luo said Beijing could "attack by oblique means and stealthy feints" to make its point in Washington.

"For example, we could sanction them using economic means, such as dumping some U.S. government bonds," Luo said.

The warnings from the PLA come after weeks of strains between Washington and Beijing, who have also been at odds over Internet controls and hacking, trade and currency quarrels, and President Barack Obama's planned meeting with the Dalai Lama, the exiled Tibetan leader reviled by China as a "separatist."

MILITARY SPENDING BOOST

Chinese has blasted the United States over the planned $6.4 billion arms package for Taiwan unveiled in late January, saying it will sanction U.S. firms that sell weapons to the self-ruled island that Beijing considers a breakaway province of China.

China is likely to unveil its official military budget for 2010 next month, when the Communist Party-controlled national parliament meets for its annual session.

The PLA officers suggested that budget should mirror China's ire toward Washington.

"Clearly propose that due to the threat in the Taiwan Sea, we are increasing military spending," said Luo.

Last year, the government set the official military budget at 480.7 billion yuan ($70.4 billion), a 14.9 percent rise on the one in 2008, continuing a nearly unbroken succession of double-digit increases over more than two decades.

The fresh U.S. arms sales threatened Chinese military installations on the mainland coast facing Taiwan, and "this gives us no choice but to increase defense spending and adjust (military) deployments," said Zhu Chenghu, a major general at China's National Defence University in Beijing.

In 2005, Zhu stirred controversy by suggesting China could use nuclear weapons if the United States intervened militarily in a conflict over Taiwan.

The United States switched official recognition from Taiwan to China in 1979. But the Taiwan Relations Act, passed the same year, guarantees Taiwan a continued supply of defensive weapons.

China has the world's biggest pile of foreign currency reserves, much of it held in U.S. treasury debt. China held $798.9 billion in U.S. Treasuries at end-October.

But any attempt to use that stake against Washington would probably maul the value of China's own dollar-denominated assets.

China has condemned previous arms sales, but has taken little action in response to them. But Luo said the country's growing strength meant that time has passed.

"China's attitude and actions over U.S. weapons sales to Taiwan will be increasingly tough," the magazine cited him as saying. "That is inevitable with rising national strength."

(Editing by Jeremy Laurence)

http://www.reuters.com/article/idUSTRE6183KG20100209

Sure. When we don't protect our trade and send all our money and jobs out of our country, the very wealth we built to defend our nation is now in the hands of other nations to buy up our companies and pay for weapons to be used against US while we're jobless and penniless to defend ourselves and our country.

Welcome to Free Trade Treason. Maybe sooner or later enough people will "get it" to stop this madness and our own self-destruction.