So far the most interesting thing we’ve read this morning comes courtesy of Naufal Sanaullah the editor of Shadow Capitalism (forgive the lack of proper capitalisation):
sudan has become a proxy playground for the china vs japan economic conflict. china continues backing north korea (to prevent pyongyang from imploding so china doesnt suffer a huge influx of fleeing dprk immigrants from the south), which is causing japan to step up its defence spending, which the prc isnt liking.
and of course theres the taiwan/east china sea issue, which escalated quite a bit with the trawler/fishing boat accident last year. this is why china halted exports of rare earth metals to japan. rare earth metals are vital to hybrid car batteries, cell phone components, television sets, etc. japan is an export-dependent dead economy facing deflationary risk while the yen keeps surging, further hurting its exports. what does it export? tech products. the inputs of which have dramatically risen in price due to china’s rare earth metals export ban (china owns 97% of the world’s current supply– although china’s monopolistic strategies will backfire due to increased mining as it becomes cost-effective due to rare earth metals prices surging… as a side note, i fully expect a rare earths metals bubble sometime in 2011-2013ish, and it’s possible it’s already started).
but the point is china is just now beginning to be friendly with southern sudan strictly because the north no longer has total control over oil exploration and distribution. japan is making more genuine ties, so it’s obvious there’s competition between the two asian nations. and with oil prices set to break $100/bbl again this year (thanks to bernanke/federal reserve, ecb, bank of england, and the trillions each of those central banks has printed), china will need access to sudanese oil more than ever. what this may mean is china and japan will have to vie for the south’s hand, and they will definitely be competing.
china is quickly going from the world’s big manufacturer to the world’s consumer as the west hits its debt wall and is forced into austerity and as the yuan de-pegging sends it to fresh highs vs the usd. in fact, last year, the big trade was buying whatever china needed– copper was huge, in particular, which is why the australian dollar performed so well. the infrastructure spending programs in china are over and tightening has begun due to skyrocketing inflation and bubble risk. what does that mean? more than ever, china will need access to food & energy supplies, and it will be precisely the monetary tightening to fight burdgeoning inflation due to lack of domestic food & energy supplies/over-reliance on food & energy imports (this in the midst of a global currency exchange rate-driven trade war, mind you) that will topple china’s property bubble and send the country back to 3-5% annual gdp growth rates, rather than the 8-11% everyone’s gotten used to. japan on the other hand has an imminent debt crisis on its hands and is likely worse off from a domestic economy standpoint due to worse internal imbalances.
as far as china/japan playing out via economic interests in sudan… not good, but also not terrible. “less-bad” is the first toward “good”. but africa, latin america, middle east, and central/southern asia are the markets that will be getting a lot of investment capital that’s quickly leaving the dead developed and overheating emerging economies. goldman coined “bric” back in 2001, and brazil, russia, india, & china definitely were the markets to buy last decade. goldman’s new group of emerging markets is n-11: bangladesh, egypt, indonesia, iran, mexico, nigeria, pakistan, phillipines, s korea, turkey, & vietnam. i’d take philippines, s korea, and vietnam out, and add in ghana, angola, and libya. maybe sudan and uganda will be the emerging markets to watch for in a decade or so…
all depends on china/japan.
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