Very smart moves of China

There are three major facts proving that China has accomplished three decisive decisions for their future. There are three articles which prove this point.

Fact 1:

The first article explains about China’s biggest oil refiner and fuel marketer Sinopec Group, which is going to acquire 40 percent of a Brazilian project firm Repsol for oil assets paying $7.1 bn. China wants to be in this market because they need a lot of natural resources for their expansion. They invest in Brazil because this country has the greatest potential of growth and also because of the reserves of oil.

Fact 2:

United States have problems with their export balance because China attracts a lot of foreign investors linked to the cheap cost of labour, raw material, infrastructure and a very low national money; the Yuan. China’s currency rate is fixed by their government. The Yuan is fixed, contrasting with the floating Dollar. US want that the Chinese government appreciate the Yuan. The reason for it is that the Yuan would become more expensive in comparison to the Dollar, so companies would invest less in China and more in the US. It would be better for the United States which are facing some trouble in their economy. China told a couple of times that they would appreciate their currency but never did so. For this reason US launched a project of law, which punishes commercial partners who maintain their currency artificially low to attract investors. This law directed against China, made the Chinese government lower their currency as a direct reaction. 

Graphic export/import for Usa between China

Source : http://www.fromrss.com/tag/chine/

Fact 3:

Last Sunday, the Chinese Primer Minister, Mr Wen made clear that China would support a stable Euro and would buy European bonds, like Greek government bonds that are very volatile and risky.

Prime Minister of China, Mr Wen and Prime Minister of Greece Mr Papandreou in Greece

Source : http://www.bbc.co.uk/

My opinion

I think that China made three very smart moves. China has an advantage linked to their political system and also because Chinese leaders are clever; they have a long term plan and stick to it. It is essential to have a stable government for a long term growth. In contrast to China, European countries and US have a new government that is elected almost every four years, changing the ruling policies and deteriorating the long term growth potential of the country. Because of these elections, they focus on short/medium term strategies, which make it very difficult to maintain a sustainable growth, in such political systems.

Each fact above is going to have a positive impact on China’s future.

The first one allows China to possess a large reserve of resources that are going to become rarer and more desirable. So China will be able of using these resources with less cost and to sell it with great profit.

The second next data reveals the position China wants to show to the world; refusing to take orders from US. They have a plan and they are ready to take any actions for the sustainable growth of their country. China will continue to have huge advantage against others countries even if they are going to revaluate their currency because they have already establish themselves as a big player and they are continuously making progress, as one of the world’s most important economical place.

The last fact points out the fact that China tries to build strong links between European countries when they are at their weakest. Even if they would lose money in short term, China would increase their influence and power in a long term. I think they have chosen the right time to make their move because EU is still weak but they are on the way to recovery. So risks are not too important and profit can be very high.