With many investors worried about the economic turmoil that has engulfed the globe, here is a look at China’s stunning move to dominate the world and the real reason why China is buying so much gold.
China Quietly Increasing Its Global Dominance
Stephen Leeb: “In a fairly lackluster week for the markets, the only news that seemed to arouse any response was China trade data. The headline numbers reported that, contrary to expectations, both Chinese exports and imports had declined in September compared to year-earlier levels, with exports dropping by more than 10 percent in dollar terms. Stock and commodity markets in the West fell in response, believing the numbers signified Chinese weakness that would hurt global growth…
But when you look more closely, things weren’t quite what they seemed. One clue: Western markets fell more than Chinese markets. If the trade news really was so bad for China, you’d expect the reaction in China would be far worse than in the West.
Moreover, the higher-than-expected decline in trade came when you looked at monthly results. But the quarterly figures told a different story: both exports and imports in the third quarter were higher than in the preceding quarter, the first time this year to see a quarter-to-quarter rise.
A Worrisome Message For The West
In other words, the trade data doesn’t depict a China that is faltering. Ironically however, they do, nonetheless, convey a worrisome message for the West, but for a very different reason.
The really pertinent news is that exports from China to countries along the “Silk Road” have exploded this year. On an unweighted basis, exports to Pakistan, Russia, Poland, Bangladesh, and India increased by over 11 percent, a remarkable number, especially in a world with barely 3 percent growth. Moreover, barring a massive economic accident, China’s trade with Silk Road countries will amount to more than $1 trillion in 2016, accounting for more than 25 percent of its total trade compared with less than 20 percent conducted with the US.
The undeveloped Silk Road encompasses nearly 4.5 billion inhabitants when you include China. By steadily creating land and maritime routes linking those vast populations, China is laying the groundwork for burgeoning trade. Through its policy banks and several dedicated development banks, including the AIIB, China will be front and center in developing infrastructure within this enormous region. According to Oxford Economics, infrastructure spending in the East will amount to over $5 trillion a year. Such spending will hand China a key lever for controlling what are still the building blocks of world growth: commodities, ranging from the very scarce, like heavy rare earths, to ones that are seemingly more plentiful, such as iron ore (see iron ore chart below).