How to profit from China’s land grab

2009 looked like it was going to be a quiet year for the Chinese Investment Corporation (CIC), China’s main sovereign wealth fund. With $300bn of foreign reserves at its disposal, it picked off a few companies here and there. But compared to the $8bn it shelled out in 2007, the CIC seemed to have lost its appetite for spending.

But not anymore.

It appears the CIC has spent much of the past year drawing up a huge list of companies it wants to buy. And now it’s gone into shopping overdrive. In July, it invested $1.5bn in Canadian mining group Teck Resources. And since the start of September, it’s snapped up three US distressed asset funds for $2bn; Indonesian energy firm PT Bumi Resources for $1.9bn; and Hong Kong commodities trader Noble Group for $850m.

CIC’s not the only Chinese titan on a shopping spree. The Chinese have planted a major foothold in Canadian tar sands, crop chemicals and Nigerian oil.

We haven’t seen a land grab like this since Europe’s colonial times. But we are also starting to see the first signs of resistance.

Last Thursday, shares in Australian rare-earth metals producer Lynas Corp were suspended after Australia’s Foreign Investment Review blocked China Non-Ferrous Metal Mining’s A$252m investment in the group. We were concerned this might happen, and recently recommended that readers bank a 226% profit since we tipped it. If the stock pulls back strongly, there may be a great opportunity to buy back in.

In the meantime, smart investors could do worse than try to buy what’s left on China’s shopping list. In our metals cover story two weeks ago, we noted a small group of invaluable metals that China has its eye on. Our tantalum tip Commerce Resources is already up 65% since then. Check out the other two tips here: How to profit from the scramble for technology metals. (You’ll need to be a subscriber to MoneyWeek magazine to read this. If you’re not already a subscriber, get your first three issues free here.)