Jim Sinclair’s Commentary

This is an excellent review of dollar related Chinese investment strategies and is worth a read.

Dear Jim,

The following article points out several factors bringing about less of a need for U.S. dollars internationally. I’ve excerpted the most relevant sections, as follows:

Industrial & Commercial Bank of China Ltd. and Bank of China underwrote $25.6 billion of syndicated loans in Asia- Pacific outside Japan this year, or 14.5 percent of the total, up from 4.9 percent a year earlier, data compiled by Bloomberg show. They’re providing capital as western banks from New York- based Citigroup Inc. to Royal Bank of Scotland Group Plc in Edinburgh retrench after global financial institutions took $1.7 trillion of writedowns and losses since the start of 2007.

While China’s overseas lending is just getting started — banks boosted overseas syndicated loans to $4.9 billion in the first 10 months of this year from $3 billion in the same period of 2008 — their growth in the market is the biggest of any nation, Bloomberg data show. U.S. and European banks’ Asia- Pacific share slumped to 14.3 percent from 30 percent in 2009…

The State Administration of Foreign Exchange in Beijing is encouraging lenders to make yuan-denominated loans overseas to cut exposure to consumers amid concern that too much cash may cause the nation’s stock and real estate markets to overheat.

Offering credit to companies outside China is also a way for the nation to invest its $2.27 trillion of reserves without buying Treasuries. China’s holdings of U.S. government debt swelled to $798.9 billion in September from less than $100 billion in 2002, according to the Treasury Department…

Chinese banks have an incentive to lend offshore," said Viktor Hjort, a Hong Kong-based credit strategist for Morgan Stanley, the No. 1 adviser on global takeovers this year. "China is sitting on large dollar reserves over-allocated to U.S. Treasuries it wants to reduce."…

China’s economy is more and more integrated into the global economy, and through this crisis we saw demand from Europe and the U.S. decline but demand from the emerging markets, particularly Asia and Africa, rise," ICBC Chairman Jiang Jianqing said in a Nov. 13 briefing in Singapore.

Click here to read the full article…