Saturday, January 24, 2009

Just wait until the axis shifts...

...from a northern hemisphere emphasis of the world.

The below article is interesting.

The "Obama Doctrine" will see the U.S. out-compete the Chinese in emerging markets. The option-value of U.S. security will be most felt in the emerging markets of the antipodes (Central and South America, Africa). Zambia's official language is English, it has a large HIV problem, 6 Billion in foreign debt, and its major export is copper. It lies landlocked in a continent where security is, charitably speaking, lacking. It is flanked by failed states (Zimbabwe and Angola). Investing in such a country without security and legal rule-sets opens up tremendous risk.

And China will have domestic challenges. The Chinese mercantilist policies (and economic "miracle") were only sustainable given global demand. They stand on a very precarious ledge with little domestic demand, an artificially weak currency, and Trillions in foreign currency savings...and all of this cloaked in an opaque political system that is rife with corruption, cronyism, and secrecy.

This article is also quite interesting as it is clearly evidence that individual Chinese people are diversifying their business pursuits. The point being capital movement at home will likely soon be restricted.

“We don’t have the type of problems we had in the past… We can get Chinese investors. You know the Chinese and perhaps the Indians seem to be the only people to have money left to invest in the mines. Several Asians, including the Chinese, are interested in coming to Zambia to take any empty mines,” he said.

China, which has pumped billions of pounds in aid and loans into Africa in the last 10 years, has an estimated $2 trillion in foreign currency reserves which it plans to diversify away from Western economies and dollar-denominated funds.

Economists say it plans to use this war chest to buy up operations abandoned by western companies – a move which delights many African countries who say former colonial powers resent China’s presence because they see Africa as their own turf.

Over the past decade, a third of all new trade and investment in Africa has come from Asia, most of it from China with India a close second. Economists say that even though demand from these countries has fallen, it has not collapsed and demand from emerging economies will ensure prices recover and remain buoyant.

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