China Uses Trade Surplus to wage Economic War for Natural Resources

BHP Billiton, a publicly traded company, made an offer to buy competitor another publicly traded company, Rio Tinto. These two companies own and operate mines across the world. They extract raw materials necessary for sustained economic growth. Most government’s around the world want to look at the merger to address anti-trust concerns. China decided to take another road to guarantee access to raw materials.

The Motley Fool reports:

You can't call Aluminum Corporation of China (NYSE: ACH), a.k.a. Chalco, a piker. Late last week, Chalco, in partnership with Alcoa (NYSE: AA), threw a monkey wrench into BHP Billiton's (NYSE: BHP) unsolicited offer for Rio Tinto (NYSE: RTP) by paying a shade more than $14 billion to take a 9% stake in dual-listed Rio.

Both houses of Congress are looking at investments by foreign governments in U.S. assets. The world’s largest Souvern Fund is Norwegian. They publish both their rules of investment and their current portfolio. Their rules include that they never take more than a 5% position in any company. They never take a management or advisory role. Most of their investments are less 0.5% of a company’s stock. The Norwegian fund also prohibits itself from making alliances with other funds for strategic purposes. To their credit no questions have ever been raised about their motives for investing in a US asset. They are truly passive investors.

China has shown that its concern is not making a financial return. Their intentions are clearly to wage economic war over resources to guarantee their future dominance of world markets. The Middle Eastern and Russian funds should be seen with the same perspective.

Henry Hank Paulsen is meeting with the G7 this month to discuss voluntary guidelines for Souvern Funds and the way they invest. I believe that the U.S. should automatically block any investment from Souvern Funds that do not adhere, in totality, to these guidelines.