Monday, March 12, 2012

349 No fear of Sovereign Debt Crisis in the US - Ellen Brown

*No fear of Sovereign Debt Crisis in the US - Ellen Brown*

* *

*(1) No fear of Sovereign Debt Crisis in the US - Ellen Brown*

*(2) China's rise matches US fall - Pat Buchanan*

*(3) WSJ says Don't worry about Trade deficit*

*(4) WSJ: Free Trade means immigration too - let Migrants in*

*(5) Foreign governments buying assets in Australia*

*(1) No fear of Sovereign Debt Crisis in the US - Ellen Brown*

* *

From: Ellen Brown <> Date: 25.07.2010 06:01 PM

Why the* U.S. Need Not Fear a Sovereign Debt Crisis*: Unlike Greece, It
is Actually Sovereign

Ellen Brown

Posted: July 23, 2010 10:45 AM

Last week, a Chinese rating agency downgraded U.S. debt from triple A
and number one globally, to "double A with a negative outlook" and only
13th worldwide. The downgrade renewed fears that the sovereign debt
crisis that began in Greece will soon reach America. That is the
concern, but the U.S. is distinguished from Greece in that its debt is
denominated in its own currency, over which it has sovereign control.
The government can simply print the money it needs or borrow from a
central bank that prints it. We should not let deficit hawks and short
sellers dissuade the government from pursuing that obvious expedient.

We did not hear much about "sovereign debt" until early this year when
Greece hit the skids. Investment adviser Martin Weiss wrote in a
February 24 newsletter:

On October 8, Greece's benchmark 10-year bond was stable and rising.
Then, suddenly and without warning, global investors dumped their Greek
bonds with unprecedented fury, driving its market value into a death

Likewise, Portugal's 10-year government bond reached a peak on December
1, 2009, less than three months ago. It has also started to plunge
virtually nonstop.

The reason: A new contagion of fear about sovereign debt! Indeed, both
governments are so deep in debt, investors worry that default is not
only possible -- it is now likely!

So said the media, but note that Greece and Portugal were doing
remarkably well only three months earlier. Then, "suddenly and without
warning," global investors furiously dumped their bonds. Why? Weiss and
other commentators blamed a sudden "contagion of fear about sovereign
debt." But as Bill Murphy, another prolific newsletter writer,
reiterates, "Price action makes market commentary." The pundits look at
what just happened in the market and then dream up some plausible theory
to explain it. What President Franklin Roosevelt said of politics,
however, may also be true of markets: "Nothing happens by accident. If
it happens, you can bet it was planned that way."

That the collapse of Greece's sovereign debt may actually have been
planned was suggested in a Wall Street Journal article in February, in
which Susan Pullian and co-authors reported:

Some heavyweight *hedge funds *have launched *large bearish bets against
the euro *in moves that are reminiscent of the trading action at the
height of the U.S. financial crisis.

The big bets are emerging amid gatherings such as *an exclusive 'idea
dinner' *earlier this month that included hedge-fund titans SAC Capital
Advisors LP and Soros Fund Management LLC.

[...] There is nothing improper about hedge funds jumping on the same
trade unless it is deemed by regulators to be collusion. Regulators
haven't suggested that any trading has been improper.

Regulators hadn't suggested it yet; but on the same day that the story
was published, the *antitrust division of the U.S. Justice Department
sent letters to a number of hedge funds* attending the dinner, *warning
them not to destroy any trading records* involving market bets on the euro.

Represented at the dinner was the hedge fund of George Soros, who was
instrumental in collapsing the British pound in 1992 by heavy
short-selling. *Soros was quoted as warning that if the European Union
did not fix its finances, "the euro may fall apart."* Was it really a
warning? Or was it the sort of rumor designed to make the euro fall
apart? A concerted attack on the euro, beginning with its weakest link,
the Greek bond, could bring down that currency just as short selling had
brought down the pound.

These sorts of rumors have not been confined to the Greek bond and the
euro. In The Financial Times, *Niall Ferguson* wrote an article titled
"A *Greek Crisis Is Coming to Americ*a," in which he warned:

It began in Athens. It is spreading to Lisbon and Madrid. But it would
be a grave mistake to assume that the sovereign debt crisis that is
unfolding will remain confined to the weaker eurozone economies.

*America, he maintained, would suffer a sovereign debt crisis as well,*
and this would happen sooner than expected.

The International Monetary Fund recently published estimates of the
fiscal adjustments developed economies would need to make to restore
fiscal stability over the decade ahead. Worst were Japan and the UK (a
fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and
Greece (9 per cent). And in sixth place? Step forward America, which
would need to tighten fiscal policy by 8.8 per cent of GDP *to satisfy
the IMF.*

The catch is that the U.S. does not need to satisfy the IMF.

"Sovereign debt" Is an Oxymoron

America cannot actually suffer from a sovereign debt crisis. Why?
Because it has no sovereign debt. As Wikipedia explains:

A *sovereign bond* is a bond issued by a national government. The term
usually refers to bonds issued *in foreign currencies*, while bonds
issued by national governments in the country's *own currency are
*referred to as *government bonds*. The total amount owed to the holders
of the sovereign bonds is called sovereign debt.

Damon Vrabel, of the Council on Renewal in Seattle, concludes:

The sovereign debt crisis... is a fabrication of the Ivy League, Wall
Street and erudite periodicals like the Financial Times of London.. It
seems ridiculous to point this out, but sovereign debt implies
sovereignty. Right? Well, if countries are sovereign, then how could
they be required to be in debt to private banking institutions? How
could they be so easily attacked by the likes of George Soros, JP Morgan
Chase and Goldman Sachs? Why would they be subjugated to the whims of
auctions and traders? A true sovereign is in debt to nobody...

Unlike Greece and other EU members, which are forbidden to issue their
own currencies or borrow from their own central banks, the *U.S.
government can solve its debt crisis by *the simple expedient of either
*printing the money it needs* directly, *or borrowing it from its own
central bank *which prints the money. The current term of art for this
maneuver is "quantitative easing," and Ferguson says it is what has so
far "stood between the US and larger bond yields" -- that, and China's
massive purchases of U.S. Treasuries. Both are winding down now, he
warns, renewing the hazard of a sovereign debt crisis.

"Explosions of *public debt hurt economies*..." Ferguson contends, "by
raising fears of default and/or currency depreciation ahead of actual
inflation, [pushing] up real interest rates."

Market jitters may be a hazard, but if the U.S. finds itself with*
government bonds and no buyers*, it will no doubt resort to quantitative
easing again, just as it has in the past -- *not necessarily overtly,
but by buying bonds through offshore entities*, swapping government debt
for agency debt, and other sleights of hand. The mechanics may vary, but
so long as "Helicopter Ben" is at the helm, dollars are liable to appear
as needed.

Hyperinflation: A Bogus Threat Today

Proposals to solve government budget crises by simply issuing the
necessary funds, whether as currency or as bonds, *invariably meet with
dire warnings that the result will be hyperinflation*. But before an
economy can be threatened with hyperinflation, *it has to pass through
simple inflation; and today the world is struggling with deflation*. The
U.S. money supply has been shrinking at an unprecedented rate. In a May
26 article in The Financial Times titled "US Money Supply Plunges at
1930s Pace as Obama Eyes Fresh Stimulus," Ambrose Evans-Pritchard observed:

The stock of money fell from $14.2 trillion to $13.9 trillion in the
three months to April, amounting to an annual rate of contraction of
9.6pc. The assets of institutional money market funds fell at a 37pc
rate, the sharpest drop ever.

So long as workers are out of work and resources are sitting idle, as
they are today, money can be added to the money supply without driving
prices up. Price inflation results when "demand" (money) increases
faster than "supply" (goods and services). If the new money is used to
create new goods and services, prices will remain stable. That is where
"quantitative easing" has gone astray today: the money has not been
directed into creating goods, services and jobs but has been steered
into the coffers of the banks, cleaning up their balance sheets and
providing them with cheap credit that they have not deigned to pass on
to the productive economy.

Our forefathers described the government they were creating as a "common
wealth," ensuring life, liberty and the pursuit of happiness for its
people. Implied in that vision was an opportunity for employment for
anyone wanting to work, as well as essential social services for the
population. All of that can be provided by a government that claims
sovereignty over its money supply.

*A true sovereign need not indebt itself to private banks but can simply
issue the money it needs*. That is what the American colonists did, in
the innovative paper money system that allowed them to flourish for a
century before King George forbade them to issue their own scrip
prompting the American Revolution. It is also what Abraham Lincoln did,
foiling the Wall Street bankers who would have trapped the North in debt
slavery through the exigencies of war. And it is what China itself did
successfully for decades, before it succumbed to globalization. China
got the idea from Abraham Lincoln through his admirer Sun Yat-sen; and
Lincoln took his cue from the American colonists, our forebears. We need
to reclaim our sovereign right as a nation to fund the common wealth
they envisioned without begging from foreign creditors or entangling the
government in debt.

*(2) China's rise matches US fall - Pat Buchanan*

From: IHR News <> Date: 26.07.2010 03:00 PM

Yankee Utopians in a Chinese Century

Patrick J. Buchanan

For those who can yet recall the backyard blast furnaces of Mao's China
in the 1950s and the Great Proletarian Cultural Revolution to re-instill
peasant values in the 1970s, the news was jarring.

In 2011, said the Financial Times, *China will surpass the United States
as first manufacturing power*, a title America has held since surpassing
Great Britain around 1890.

Each years, China passes a new milestone.

Last year, China surpassed Germany as the greatest exporting nation.
This year, China surpasses Japan as the world's second-largest economy.
This year, China became the first auto manufacturer on earth.

For a decade, China has been running history's largest trade surpluses
with the United States and has amassed a hoard of $2.3 trillion in
foreign currency. She now holds the mortgage on America.

How has China vaulted to the forefront in manufacturing, trade and
technology? Export-driven economic nationalism.

Beijing *cut the value of its currency in half in 1994, doubling the
price of imports, slashing the price of exports* and making Chinese
labor the best bargain in Asia. Foreign firms were invited to relocate
their plants in China and told this was the price of access to the
Chinese market. Beijing began looting these firms of technology, as she
sent her sons to study in America. Industrial espionage and intellectual
property theft became Chinese specialties.

And how has America fared in the new century?

One in every three manufacturing jobs we had in 2000, nearly 6 million,
vanished. Some 50,000 U.S. factories shut down. We have run trade
deficits totaling $5 trillion since NAFTA passed. The real wages of
working Americans have been stagnant for a decade.

While China has resumed her 12 percent growth rate, the United States,
with 25 million unemployed or underemployed, appears headed for a
double-dip recession.

Yet, even as the end of America's tenure as the world's first
manufacturing power was being announced, The Wall Street
Journaladmonished us to keep our eyes on the prize: a new world order
where it does not matter who produces what or where.

"The pursuit of some ideal global 'balance' in trade and capital flows
is an illusion. ... World leaders would do better to worry less about
(trade) imbalances and more about whether their own nations are pursuing
policies that contribute to global prosperity."

There you have it — the conflict in visions between us.

For decades, America's leaders have followed the Wall Street Journal

We put a mythical world economy before our own economy. We put *"global
prosperity" before national interest. *We forced our workers to compete,
in their own country, against the products of foreign laborers earning a
tenth of their pay. And we let in tens of millions of semi-skilled and
unskilled immigrants, legal and illegal, to take the jobs of our

And the Chinese? They put China first, second and third.

And who won the decade? And who is winning the future?

Inside the July 1 Washington Post is a small story about how the World
Trade Organization finally ruled that European nations have been
unfairly subsidizing Airbus — for 40 years.

While welcome, what good will it do now for scores of thousands of U.S.
workers who built commercial jets for Lockheed and McDonnell Douglas,
which Airbus took down, or Boeing, which was outsourcing jobs even
before Airbus dethroned it as the world's No. 1 aircraft manufacturer.

Why did some U.S. president not tell the Europeans when they started
this: Either stop subsidizing Airbus to kill our U.S. aircraft companies
— or start defending yourselves against the Russians.

The day the FT reported that China was sweeping past us to become No. 1
in manufacturing, The New York Times ran a front-page story on the
closing of the Whirlpool refrigerator plant in Evansville, Ind., and the
loss of 1,100 jobs. The plant is moving to Mexico.

The Times spoke with Natalie Ford, a worker, whose husband and son also
worked at Whirlpool, as had her dad, "This is all about corporate
greed," Mrs. Ford said, "It's devastating to our family and to everyone
in the plant. I wonder where we'll be two years from now. There aren't
any jobs here. How is this community going to survive?"

"My mom and dad told me that when they were young, there were jobs
everywhere. They said we had Whirlpool, Bristol-Myers, Mead Johnson,
Windsor Plastics, Guardian Automotive, Zenith. Now if you want to find a
job, there's nothing around."

"Free trade! Free trade!" said Henry Clay in the tariff debate of 1833.
"The call for free trade is as unavailing as the cry of a spoiled child
in its nurse's arms for the moon or the stars that glitter in the
firmament of heaven. It has never existed. It will never exist."

It will only place us, said Clay, "under the commercial dominion of
Great Britain." Today, it is the dominion of China.

*(3) WSJ says Don't worry about Trade deficit*

The China Currency Syndrome

World leaders would do better to *worry less about imbalances *and more
about whether their own nations are pursuing policies that contribute to
global prosperity.

JUNE 20, 2010

The best that can be said for China's weekend decision to drop its
dollar peg and again adopt more "exchange-rate flexibility" is that it
may avert a trade war. What no one should believe is that China's move
will "rebalance" the world economy or send manufacturing jobs rushing
back to America.

The People's Bank of China asserted that its decision was made in
China's own economic interests, and no doubt that's true. But its timing
a week before the Group of 20 meeting in Toronto is no coincidence,
comrade. China did not want its exchange rate to become the conclave's
focus, diverting attention from the failures of U.S. and European
economic policies.

Senator Chuck Schumer and other U.S. protectionists have also been
promising a new tariff against Chinese goods if Beijing didn't move on
the exchange rate. And this time the New York Democrat seemed to have
corralled such key party colleagues as Max Baucus, chairman of Senate
Finance, and Sander Levin of House Ways and Means as his Smoot and Hawley.

China's decision to abandon its currency peg has rippled through global
markets, giving a boost to assets perceived as riskier, including
stocks, commodities and growth-linked currencies. How lasting will the
impact be? Paul Vigna, Madeleine Lim and Michael Reid discuss.

Given the Democratic panic about their November election prospects and
President Obama's ebbing political authority, a protectionist mistake
from the U.S. Congress cannot be ruled out. China's move reduces the
odds of such a blunder, at least in the short run, and that should help
the fragile world recovery.

We say "short run" because China's decision won't end the global demands
for a revalued yuan. The People's Bank of China statement made clear
that a big one-time revaluation is not in the offing, and the band in
which the currency trades daily will not be widened. U.S. Treasury
Secretary Timothy Geithner immediately responded that China's move "is
an important step but the test is how far and how fast they let the
currency appreciate." Mr. Schumer demanded even more aggressive
revaluation and said he'll still try to move an anti-China trade bill.

Beijing knows that yuan volatility will only hurt its domestic
exporters, the main driver of employment, and deter the kind of stable,
long-term foreign investment it wants to attract. So a "flexible"
exchange rate probably means a managed crawl, akin to the policy that
let the yuan appreciate by some 21% against the dollar from 2005 until
the financial panic hit in 2008. However, the expectation of a gradually
stronger yuan will only invite more global "hot money" betting on
further yuan appreciation.

These capital inflows have made it increasingly difficult for Chinese
monetary authorities to control both the exchange rate and domestic
inflation. So has the U.S. Federal Reserve's extraordinarily loose
monetary policy, which shows no signs of changing and is producing price
bubbles in Asia, notably in Chinese property. The decision to unpeg the
yuan from the dollar frees China's central bank to pursue a monetary
policy independent of the Federal Reserve and thus reduce the risks of
imported inflation.

On the other hand, China's central bank will have to continue its
accumulation of dollar assets, which it will then recycle around the
world into the likes of U.S. Treasury bonds. A better solution would be
to make the yuan more convertible and give private market actors more
influence over trade and capital flows, rather than depending on the
central bank. But that won't happen until the Communist Party agrees to
depoliticize the allocation of credit and give more power to private
citizens. The political irony is that China's rulers prefer the West's
preoccupation with the exchange rate, which is easier to accommodate,
rather than having to undertake more fundamental reform.

Another illusion is that a revalued yuan will reduce global "imbalances"
and especially the U.S. trade deficit. The 2005-2008 revaluation did
little to move the trade numbers. And as Stanford economist Ron McKinnon
has documented, the U.S. forced a similar revaluation on Japan in the
1990s, and the result was little long-term change in the trade deficit
between the two countries.

To the extent that a revalued yuan raises production costs in China,
*some of its manufacturing will move to Vietnam, Bangladesh* or other
lower-cost countries. Meanwhile, U.S. consumers will pay more for
imported goods, and Chinese producers will be forced to become even more
competitive and thus a bigger global challenge to U.S. companies.

As for the U.S., the yuan has become a convenient scapegoat for
Washington's policy mistakes. The neo-Keynesians who've been running
U.S. economic policy since 2007 promised that their stimulus would
deliver millions of new jobs. Now that those jobs have failed to
materialize, Democrats blame China's exchange-rate policy. But no
country in history has devalued its way to prosperity, and the U.S.
won't be the first.

The dollar has benefitted in recent months from the investor flight to
safety amid the European sovereign debt panic. This has masked the risks
to the dollar from the easiest Federal Reserve policy in modern history.
Those risks will accelerate if the panic eases and investors look once
again to protect themselves against the dollar's decline. One by-product
of the last period of yuan revaluation (and dollar decline) was a spike
in the price of global commodities traded in dollars. Another such spike
would not help global growth. ***

The pursuit of some ideal global "balance" in trade and capital flows is
an illusion of IMF officials and other central planners. World leaders
would do better to worry less about imbalances and more about whether
their own nations are pursuing policies that contribute to global
prosperity. In the U.S. and Europe, that means a major policy turn
toward spending restraint, lower taxes, freer trade and less political
control of business.

*(4) WSJ: Free Trade means immigration too - let Migrants in*

Immigrants -- Good or Bad?

John Stossel

I'm confused about immigration.

We libertarians believe in free trade. That includes trade in labor,
too. New people bring us not just labor, but also good new ideas. Open
immigration during America's first hundred years helped make America rich.

Open immigration is dangerous today, however, because some immigrants
want to murder us. And now that America is a welfare state,* some want
to come here just to freeload.* That great champion of freedom Milton
Friedman said Mexican immigration is a good thing — but only so long as
it's illegal. "Why? Because as long as it's illegal for people to come,
they don't qualify for welfare and Social Security. So they migrate to

But closing our eyes to illegal immigration cannot be good policy. So
what should American do?

I sat down with Heather MacDonald of the conservative Manhattan
Institute, author of "The Immigration Solution," and Jason Riley of The
Wall Street Journal's editorial board, author of "Let Them In." I
respect them both. But they radically disagree on immigration policy.

"The case for open borders is a case for letting the law of supply and
demand, the free market, determine the level of immigration," Riley
said. "Right now, that determination is being made by politicians and
public policy makers. ... And like all exercises in Soviet-style central
planning, it's been a complete disaster. We have thriving markets in
document fraud ... and 12 million-plus illegal aliens. ... (W)e would do
better to move to a system that allowed the free market to determine the
level of immigration. And that's the case for open borders." Riley
proposes a guest-worker program. "That is the way to reduce illegal

Heather MacDonald retorts: "A country is not a firm. And it is
absolutely the prerogative of a nation and its people to decide its
immigration policy. ... We should have an immigration policy that
accentuates our natural economic advantage in the 21st century, which is
as a high-tech, high-science economy. ... (T)he overwhelming number of
immigrants that are coming in largely illegally are extremely low
skilled." MacDonald worries that "we're facing, for the first time in
this country's history ... the first *decrease in national literacy and
numeracy *... . "

She wants to copy Australia's and Canada's policy: "high skills, English
language and education. ... We should be looking out for our own
economic self-interest." Riley disagreed with MacDonald's claim that
Mexican immigrants don't fit America's modern economy.

"(T)oday's immigrants coming here are not different in terms of their
behavior patterns, in terms of their assimilation levels. They are
simply newer."

"Immigrants increase crime!" is another charge hurled at illegals, but
the data don't bear that out. There has been a surge in immigration over
recent years, but crime has been dropping. Crime has dropped in the
border areas of Arizona and California, too.

MacDonald said crime was high during immigration surges in the 1970s and
'80s, and attributed the recent drop to higher incarceration rates. But
Riley noted, "Incarceration reports from the Justice Department ... show
that the native-born are five times more likely than the immigrant
population to be arrested and incarcerated ... ."

But if today's illegals are not eligible for welfare, less likely to
commit crimes and eager to work, why are people in the border states so
ticked off?

"Why wouldn't they be?" Riley said. "It's chaos down there. There's
trespassing. There are people breaking the law. We're a nation of laws.
It's out of control. The question is how to fix it. And I don't think
sealing off the border is the best way to fix it. I think regulating the
flow is the best way to fix it."

It would be easier to "regulate the flow" if America made it easier for
people to work here legally. State Department data show that a British
Ph.D. in bioengineering must wait about six months to get a green card.
A South African computer programmer, six years. An Indian computer
programmer, 35 years.

A Mexican with a high school diploma must wait a theoretical 131 years!
No wonder people sneak into America.

Black markets make problems worse. America should let more people come
here legally.

*(5) Foreign governments buying assets in Australia*

Foreign government investments in Australia

March 5, 2010

This list tracks major sovereign investments in Australia, demonstrating
how both Singapore and China are set to own more Australian business
assets than our own government.

Major Chinese Government investments in Australia

Chinalco: spent $15.5 billion for 9% of Rio Tinto shares in London on
February 3, 2008.

China Iron & Steel: The Rio Tinto-operated Channar iron-ore mine in the
Pilbara has a capacity of 10mtpa and is 40% owned by China Iron and
Steel, an investment worth well over $2 billion.

China Petrochemical Corporation: China's biggest energy distributor
secured 60% and control of the Puffin oil field in the Timor Sea from
the struggling AED Oil in 2008. The deal values the assets at $1 billion.

CNOOC: holds a 25% share in China LNG, a new joint venture within the
existing $19 billion North West Shelf structure that diluted the other
six joint venture parties down to 12.5% each.

Shanghai Baosteel Group: owns 46% of the Rio Tinto-operated Eastern
Range iron ore mine in Pilbara which produces 6.5 million tonnes a year
worth more than $500 million a year. Chinese investment now worth more
than $1 billion.

CITIC: paid more than $400 for its 22.5% stake in the Portland Aluminium
Smelter in the 1990s.

Shougang Corp: spent $400 million buying 20% of WA iron ore company Mt
Gibson Iron in early 2008 and then teamed up with fellow Chinese
investors APAC as part of an emergency $162 million capital raising in
January 2009 that left Shougang with 14.34% and APAC with 28%.

CIC: alongside Macquarie bank, China Investment Corporation agreed, in
June 2009, to lend $200 million in Australia's leading property trust
Goodman Group.

Sinosteel: completed a $1.37 billion takeover of WA iron ore hopeful
Midwest Corp after a 2008 takeover bid pitched at $6.37 a share. Would
like to buy neighboring Murchison Metals, but FIRB has limited it to a
maximum 49%.

CITIC: spent $113 million in July 2007 lifting stake in Macarthur Coal
stake from 11.6% to 19.9% but is now losing on the investment after the
resources bubble burst.

Consortium: five Chinese companies were given FIRB approval in January
2008 to develop the $3.5 billion Oakajee port and rail project in WA and
then former WA Premier Alan Carpenter announced the winning tenderer in
August 2008, but construction hasn't started yet.

Chalco: in September 2007 Queensland government awards rights to develop
$3 billion bauxite project near Aurukun, which Noel Pearson has claimed
includes an unfair forced land grab. This is now in doubt as Chinalco
will be keen to focus its attention on expanding Rio Tinto's Queensland
bauxite operations at Weipa.

Anshan Iron & Steel: paid $39 million in September 2007 for 13% of iron
ore miner Gindalbie and signed $1.8 billion joint venture deal to
develop the Karara Iron Ore project in Western Australia. Backed this up
with a $162 million placement at 85c a share to Ansteel in February 2009
which increased its stake to 36.3%.

Shougang Corp: China's fourth biggest steel group spent $56 million in
March 2007 buying 13% or iron ore developer Australian Resources and has
an option to inject a further $42 million. Shougang has also agreed to
fund the $US2.1 billion development of the Balmoral South mine and port
project in WA thorugh an interest free loan and also buy the entire output.

China Metallurgical Group: paid $400 million for the Cape Lambert Iron
ore project in WA in 2008, which is now in doubt given that China has
secured its supplies through Rio Tinto.

China Nonferrous Metal Mining Co (CNMC): secured a 51.66% shareholding
for $252 million of Sydney-based rare earths company Lynas. CNMC also
provided a corporate guarantee to a Chinese Bank to raise another $253
million, which brings the cost of transaction to $505 million. They have
since been denied the percentage of ownership by a decision by the
regulator FIRB which requestedto be cut to less than 50 per cent.

Resource Development International: Gold Coast-based Clive Palmer who
still claims to be worth more than $5 billion was hoping to raise more
than $1 billion from Chinese investors through a float of this iron ore
venture that is still to get off the ground.

Zhongjin: China's third largest zinc producer paid $45 million to take
control of Broken Hill-based Perilya in early 2009.

*Deals that have fallen through*

Chinalco: spent $15.5 billion for 9% of Rio Tinto shares in London on
February 3, 2008, then made a $24.4 billion offer for Rio Tinto, which
would have been the biggest deal in Australian corporate history.
Chinalco, otherwise known as the Aluminum Corp. of China, signed an
agreement to invest in Rio Tinto to secure resources for China and
assist Rio Tinto with debt reduction.

Sinochem Corp: China's biggest chemicals trader, offered a revised $2.6
billion or $12 per share takeover for pesticide maker Nufarm, which was
rejected, after decreasing their initial offer of $13 per share. A deal
with Japan's Sumitomo Chemical was swiftly finalised when Sumitomo
agreed to pay $14 per share to buy up to a 20 per cent stake in the
Victorian-based Nufarm.

Offers on the table

Bright Foods: one of the world's biggest food companies, best known in
China for making "white rabbit" lollies, made a $1.5 billion bid for the
130-year-old CSR - Australia's main sugar refiner.

*Singapore Government investments in Australia*

1995: Singapore government body, Capita Land, buys controlling stake in
property developer Australand which is now worth more than $1 billion.

June 2000: Singapore Power, which is fully owned by the state, buys
Victoria's monopoly electricity transmission business Powernet for $2.1

2001: Singtel, which is majority owned by the state, pays $14 billion,
much of in shares, for *Optus*.

April 2004: Singapore Power paid $5.1 billion for TXU's Australian
energy portfolio in April 2004, although $2.2 billion of retail and
generation assets were on-sold to China Light & Power in March 2005.
Late in 2005, 49 per cent of the remaining Australian power assets were
floated in a vehicle called SP Ausnet, raising $1.3 billion.

2007: Singapore Power pays $4.5 billion in cash to Alinta shareholders
to become the *monopoly gas distributor in NSW and the largest
distributor of electricity in Victoria*.

May 2007: Singapore sovereign fund, the GIC, pays $717 million for a 50%
stake in Westfield Parramatta, Australia's third-most valuable shopping

June 2007: the GIC teamed up with the Commonwealth Bank and the Myer
family to pay $600 million for the prestigious Myer Melbourne complex.

June 2007: Temasek Holdings paid $401 million or an excessive $7.30 a
share for 12% of ABC Learning to become the largest shareholder in the
world's biggest childcare company.

August 2007: Cityspring Infrastructure, which is backed by Temasek, paid
a hefty $1.2 billion for the Basslink electricity cable linking the
Victorian and Tasmanian grids.

August 2008: Temasek helped save Australia's biggest office tower
investor by underwriting part of an emergency $1.6 billion capital
raising that left it with almost 20%.

*The Middle East*

Dubai World, a holding company owned by the government of Dubai in the
United Arab Emirates bought P&O in March 2006 for $US7 billion, giving
it a half share in Australia's lucrative stevodoring duopoly.

Sheik Mohammed: the ruler of Dubai splashes $460 million buying the
thoroughbred, training and bloodstock operations controlled the Ingham

Kuwait Government: owns 50% of Australia's tallest office tower, the
Rialto, through the St Martins property business which also controls
three buildings in Perth's St George's Terrace.

*Rest of the World*

UK: The government-underwritten *BBC bought control of* Australia's
iconic travel publishing business *Lonely Planet* in July 2007.

Canada: the Canadian Pension Plan now owns 15% of tollroad giant
Transurban after a recent placement to reduce debt.

Netherlands: The Dutch government and eduction sector pension fundand,
Stichting Pensionefonds ABP, which controls about $350 billion in
assets, bought 40% of Goldfields House at Circular Quy in Sydney from
the struggling Valad Property Group.

Additionally, here are lists of foreign companies generating more than
$200m, and Australia's improving foreign ownership record.

Check out all the Mayne Report business lists here. Go here to see the
full comprehensive list of lists we've created documenting the dominance
of foreign investors in Australia and our relative poor performance on
the international business stage.

No comments:

Post a Comment