Is China Building the New Improved Global Empire?

Damien Hoffman Wall St. Cheat Sheet September 13, 2010

September 08 2010 tweetmeme_style = 'compact'; Email

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First the the Egyptians gave it a run. Then the Greeks and Romans took a try. Later the Iberian Peninsula and Great Britain sat atop the throne for a round. And, of course, there is no shortage of historical dynasties in Asia.

However, since the end of WWII, the United States has held the title of most powerful empire on Earth. It all came together with a concoction of confidence, ambition, work ethic, and unity. There were also some very helpful details such as sanctions on Germany and Japan, a war torn Europe and Russia, and a surprisingly insulated Asia.

Fast-forward to 2010. The US has squandered a couple generations of wealth through trade imbalances and costly wars. Then the recent economic crisis created the perfect window of opportunity for a faster growing and more economically stable China (FXI) to start deploying their rooks and bishops.

My passion is strategy. And when I look at how China has started diversifying away from the dollar, building an internal consumer class, and buying huge reserves of natural resources across the globe, I see an emerging global empire that may never shed an ounce of blood in conquest for their prize.

This weekend Bloomberg/BusinessWeek published an incredibly revealing look at how China is empire building second-millennium style. The article specifically focuses on how China is buying up natural resources across Australia while purchasing equity positions in the companies collecting the cash. This morning, news is breaking that Chinese state-owned chemicals group Sinochem is seeking to bid for key fertilizer company Potash (POT).

This strategy alone guarantees China will take back at least a portion of the wealth they are sending to Australia in exchange for finite resources. Contrast this strategy with that of the US: the US chose not to own equity in most of the companies serving up resources via China or the Middle East. Instead, the cash sent abroad stayed abroad.

On another note, China has found more peaceful ways to control foreign resources in Africa, Brazil, Canada, and other countries across Asia and the Pacific. To date, China has not entangled itself in a war comparable to Iraq I or II. When you own a big slice of the foreign operations, there’s less room for partners to go rogue.

Looks like the Chinese learned something from our gigantic missteps. Unless you think they aren’t intelligent, I think we are bearing witness to what will one day be seen as an empire expansion as important as those I mentioned at the start of this post. But worry not: China will make mistakes and in those gaps the seeds for the next great empire will be sown.

Want to make safe investment for the long term like China? Don’t Miss: Your Cheat Sheet to Investing in Agriculture >

More on this topic (What's this?) Auerback: China is Still a Renegade Nation (naked capitalism, 9/10/10) Andy Xie on China's Empty Apartments (naked capitalism, 8/4/10) Japan and China Sitting in a Tree"¦ (Investment U, 8/26/10) "No. 1 China Stock for 2010"¦ textbook (though exceedingly rare) opportunity to profit from th... (Stock Gumshoe, 7/29/10) Read more on Investing in China at Wikinvest Sharing Is Cool reddit_url='http://wallstcheatsheet.com/breaking-news/is-china-building-the-new-and-improved-global-empire/?p=17782/' reddit_title='Is China Building the New-and-Improved Global Empire?' yahooBuzzArticleHeadline = "Is China Building the New-and-Improved Global Empire?"; yahooBuzzArticleType = "text"; yahooBuzzArticleId = window.location.href;

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This post was written by:

Damien Hoffman - who has written 925 posts on Wall St. Cheat Sheet.

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Tags: australia, Bloomberg/BusinessWeek, businessweek, chemicals group, China, chinese state, concoction, costly wars, dynasties, economic crisis, empire building, equity positions, fertilizer company, finite resources, fxi, global empire, greeks and romans, iberian peninsula, millennium style, potash pot, rooks, sinochem, work ethic

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