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View Full Version : Where does China gets so much dollars to buy up all the commodities in the world?



touchring
05-05-10, 09:37 AM
Has China pledged hundreds of billions or even a trillion US debt to banks to finance its spending spree? I read something like this on this forum sometime back or some article.

I know that when interest rates are low, bond prices are high, and with interest rates so low, China should be able to get quite a lot of credit for their bonds.

What are the implications when interest rates start to rise and implications to the banks lending China the money, the implications to the bond market once this fact is revealed, and the resulting implications to commodity markets including the fabled gold? lol

Nivelles
05-05-10, 06:51 PM
Where did China get the money? -- trade surplus.

Pledging money to U.S. banks? -- no, that would be the Federal Reserve and the U.S. Treasury which have been doing that.

In recent history, China has spent quite a bit of their surplus income to buy U.S. Treasury bonds, or bills, but they don't have to spend their money that way.

Interest rates, well, that's a large subject.

we_are_toast
05-05-10, 07:32 PM
Has China pledged hundreds of billions or even a trillion US debt to banks to finance its spending spree? I read something like this on this forum sometime back or some article.

I know that when interest rates are low, bond prices are high, and with interest rates so low, China should be able to get quite a lot of credit for their bonds.

What are the implications when interest rates start to rise and implications to the banks lending China the money, the implications to the bond market once this fact is revealed, and the resulting implications to commodity markets including the fabled gold? lol

I asked a similar question a while back, and am still wondering.


I've been wondering about this lately. China has been undergoing massive infrastructure building projects, foreign purchases of commodities and companies, and raised the standard of living of a couple of hundred million of it's citizens. How can they possibly be spending all this money and hoarding it at the same time? I'm wondering if most of the Tbills and reserves have already been leveraged. If so, the ripple effect from their bubble burst could be every bit as large as our own.

touchring
05-05-10, 11:55 PM
I asked a similar question a while back, and am still wondering.

Yes, this will be the ultra black swan if true. Great repercussions on the markets if interest rates start to rise.

Chinese companies are known to be debtors from hell, so it will be interesting to know what will happen to international banks with such exposures once the truth is known.

GRG55
05-06-10, 12:40 AM
Yes, this will be the ultra black swan if true. Great repercussions on the markets if interest rates start to rise.

Chinese companies are known to be debtors from hell, so it will be interesting to know what will happen to international banks with such exposures once the truth is known.

Probably the same thing as lenders to supposedly "sovereign" entities in Dubai...only bigger. Much, much bigger...

touchring
05-06-10, 01:28 AM
Probably the same thing as lenders to supposedly "sovereign" entities in Dubai...only bigger. Much, much bigger...


Well, not totally the same. The creditors can have the US bonds, whatever they are worth by then.

If I'm China, I'll probably do the same. While the world plays with monopoly money, I will pledge the bonds and buy as much commodities and mines as possible. All done in covert.

Even at current levels, commodities are still undervalued. Just look at how much the Iraqi war costs in terms of money, goodwill and lives? In medieval and antiquity times, it is often illegal for individuals to mine or export commodities in bulk. Commodities cannot be acquired using paper money, it has to be exchanged with other commodities, e.g. silver or gold or acquired by force, war. China is getting a bargain of the millennium.