29 September 2011

China's 'resource imperialism' a risk for Australia: James Dines

Leading American investment analyst James Dines has criticised Australia for allowing China to buy large swathes of its natural resources in what he calls "resource imperialism".

Australia was in danger of squandering it's "irreplaceable inheritance ... traded for easily printed paper", Mr Dines said.

Mr Dines, the keynote speaker this week at the RIU Victorian Resources Roundup conference, told an audience of mining executives, brokers and investors that the end of capitalism as we knew it had arrived and that we were in the second great economic depression.
Advertisement: Story continues below

His entertaining, if alarming, speech would have prompted mixed feelings among a crowd that included executives with a strong Chinese presence on their share registries.

State-owned Chinese companies are also becoming a major foreign investor in Australia.

Mr Dines, editor of the Dines Letter and author of numerous books, described natural resources, including farmland, as a source of real wealth that should be kept for "your descendants".

By pursuing resource imperialism, China was building stockpiles of commodities well above its immediate needs, such as rare earths - it already produces 97 per cent of the world total - and copper.

The Australian Foreign Investment Review Board blocked a $252 million bid by state-owned China Nonferrous Metal Mining to acquire Australian rare earth miner Lynas in 2009.

China's motivation

The world's most populous country wants to secure its resource needs for centuries to come.

Instead of seizing the means of production, as Karl Marx advocated, the Chinese Communist Party was legally buying it in what Mr Dines believes is the end of capitalism as we know it.

"They are not buying a copper mine to re-sell at a higher price. They are buying it to use all that copper for China," he said.

"China are storing (commodities) as a form of hard money for next century and beyond."

Mr Dines said he was not being anti-China.

"What they're doing is legal and far-sighted thinking."

He contrasted that with the US, where investors were fixated on quarter to quarter earnings.

Currency collapse

In contrast, the US and Europe had not learnt from history and had brought about a second economic depression by incurring massive debts and trying to make repayments by printing more money, he said.

He believes it will ultimately lead to the currency system collapsing.

The doubling of the money supply to pay for World War I led to inflation in the 1920s and the Depression of the 1930s, he said.

Mr Dines says what's needed is a currency linked to gold stores to limit printing.

America's government debt will swell to an estimated $US20 trillion in the next nine years was, something it will never repay, he says.

China currently holds $US3 trillion in foreign exchange assets and could "buy the whole world".

So, how should Australia and the world respond to this new world order?

The prevailing view here is that the mining boom is a great thing and will last indefinitely, with a rapidly urbanising China and India buying our resources.

But Mr Dines points out that heavy demand from the developing countries of the world will put a strain on finite resources, with oil certain to run out this century.

He says Australia should ensure that a percentage of all mines and farmland is kept in Australian hands, to protect the country's food and resource security.

High food prices prompted violent social unrest in the Middle East this year.

He also recommends relying less on mining and more on renewable industries such as tourism, crops and seafood.

"Sooner or later, Australia is going to need those rare earths for its own (hi-tech) manufacturing, or else your kids will be buying your own rare earths back from China, with a significant mark-up," Mr Dines said.

If he did have a positive message, it was to invest in gold and silver, which, he says, are the ultimate monetary metals, with gold having risen in value every one of the last 11 years.


No comments: