Taking It on the “Americhin”

   Americhin – it’s a strange word. I heard it for the first time last night on CNN. A panel of economists were debating how the world might recover from our deepening recession. All their talk was mere opinion. My opinion is that not a single expert has the slightest idea what they’re doing – or if they do, they lack the political will to take necessary steps.

   It’s no secret that the crisis is a credit crisis and that the only way to get credit flowing again is to neutralize toxic assets sitting on bank balance sheets. Have you noticed that “toxic assets” is the one buzz word that no world leader wants to talk about?

   I found curious the theory floated on CNN that the U.S. and China could together emerge as economic superpowers through various synergies. Even more curious, that economists have already coined a new buzzword – Americhin.

   Again, I don’t know. I’m not a Ph.D. What I do know – as a publisher of energy media – if I want to draw a sudden surge of traffic to my website, all I have to do is post something about China. The biggest traffic generator this month on www.oilandgaseurasia.com was an article from Bloomberg, written by journalist Wang Ying: “China to Offer Oil Loans, Set up Acquisition Fund.”
Bloomberg wrote: “China, the world’s second-biggest energy user, will offer preferential lending rates for overseas oil investments and may tap the country’s $1.95 trillion foreign-exchange reserves to help companies buy fields abroad.

   “The nation may set up an oil fund to boost exploration,” China National Petroleum Corp.,  the country’s biggest oil producer, said in a statement on its website, citing the state’s three-year energy plan. “The government will increase capital injections of overseas spending on energy assets,” it said.
We reported on www.oilandgaseurasia.com also about China having signed a $25-billion energy deal with Russia in Beijing to secure 15 million tons of oil – 300,000 bpd – from Moscow for the next 20 years in return for loans. If you do the math, you’ll find the deal is based on an oil price in the $90-$100 a barrel range.

   Quoting again from Bloomberg: “China has sought to take advantage of the drop in commodity prices to lock in resources worldwide. China’s oil and gas shortages will continue over the ‘long term’,” PetroChina Chairman Jiang Jiemin said on Jan. 12. “The country relies on imports for about half of its crude consumption, which rose by 6.5 percent last year,” China National Petroleum said on Feb. 10.

   China plans to boost its total oil refining capacity of 440 million tons by 2011 and will push forward joint-venture refinery projects with companies from Venezuela, Qatar and Russia. China’s oil-processing capacity is about 396 million tons currently, according to Bloomberg calculations. “The government plans to start building four additional liquefied natural gas import terminals in Qingdao, Ningbao, Tangshan and Zhuhai,” China National said. “China will start building pipelines to import oil and gas from Myanmar before the end of 2011.”
Quoting again from Bloomberg: “Chinese companies have resumed their quest for global resources after a two-year hiatus as the economic slowdown and falling commodity prices prompt a sell-off in share markets, making companies cheaper to acquire. Crude oil in New York has fallen more than 70 percent from a record $147.27 a barrel reached in July last year. China’s foreign-exchange reserves are the world’s biggest.”

   Maybe the “Ameri” part of Americhin has to do with those foreign-exchange reserves.  It is after all no secret that China is the greatest holder of U.S. debt and in effect financed the war in Iraq. Imagine what might happen if this particular banker decided to foreclose and call in the loans. If such a thing is to emerge, I think it would be wiser to call it “Chinamer.”

   For China is really the capitalist of all capitalists. While the U.S. slides towards Socialism, the state I grew up calling “Red” China seems to be doing what smart capitalists do in a recession – they make lemonade out of lemons. Returning again to Bloomberg, journalist  Wang Ying quoted Gordon Kwan, head of China energy research at CLSA Ltd. as saying that “the fund makes perfect sense because overseas acquisition will instantly boost production and reserves, probably at very attractive long-term prices amidst distressed asset valuations at the bottom of the oil price cycle.”

   “Oil companies are encouraged to boost development and acquisitions of resources abroad, China National, the parent of Hong Kong-listed PetroChina Co, said in the energy plan. The plan to 2011 covers China’s ambitions to speed up the development of alternative fuels, coal-to-liquids projects, and the setting up of a separate fund for the stockpiling of crude oil.” So boys and girls, it’s time to start studying your Mandarin.

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