Dan Zwirn, the Man Who Fell to Earth

On the lengthy list of things Dan Zwirn has lost, a few items jump out. There’s the $17 million condo on Central Park South, the summer place in Quogue, N.Y., and the $18 million Gulfstream IV jet. Then there’s D.B. Zwirn & Co., the hedge fund that once managed $12 billion in assets, employed 275 people in 14 global offices, and created the roughly $700 million in personal wealth that made so many of Zwirn’s spectacular purchases possible. Zwirn, 40, misses his money and the things it afforded him. But what he misses most, he says, is his “beautiful machine.”

That’s Zwirn’s term of endearment for his now-defunct hedge fund. The beautiful thing about it was its discipline. D.B. Zwirn abstained from the directional or leveraged bets that other hedge funds make. Instead the firm provided capital to about a thousand companies with few other financing options—companies such as a small New York-based Spanish-language radio group and a company that leased slot machines to casinos on Indian reservations. The one and only strategy was to learn everything about the prospective borrowers, figure their odds of repayment, crank up the interest rate to the proper pain point, and grind out 1 percent a month in profits.

For 49 straight months, Zwirn, who aspired to be the hedge fund world’s scrappy singles hitter, got paid like a home run champ. The D.B. Zwirn Special Opportunities Fund had gross returns of 21.8 percent in 2003, 21.6 percent in 2004, 18.9 percent in 2005, 24 percent in 2006, and 16 percent in 2007. As machines go, Zwirn’s was a Ferrari.

Read More at Bloomberg Businessweek

Europe Gets Ready for Round 2 of Bank Loans

European commercial banks were unable to raise money to lend to customers. Borrowing costs for Spain, Italy and Portugal were threatening to spin out of control, and Greece’s had risen to levels that would make a loan shark blush. Analysts were issuing reports predicting that Greece would leave the euro zone — if the currency union was lucky. The worst case was that the euro would disintegrate.

“The situation was deteriorating,” recalled one policy maker, who did not want to be named because internal central bank discussions are confidential. “Something had to be done.”

In the weeks that followed, the central bank’s governing council and its new president, Mario Draghi, succeeded in defusing the tension with a monetary policy tool that they will deploy again this week: unlimited three-year loans to commercial banks at the rock-bottom interest rate of 1 percent. Read more at the NYTimes...

A Call for Beijing to Loosen Its Grip on the Economic Reins

A new study by theWorld Bank and a Chinese government research organization warns that the country’s economic growth is likely to diminish over the next few decades unless China alters its development model and rethinks the role of government in managing the economy.

The report, called “China 2030,” and produced by the bank and the Development Research Center, the government research organization, calls on Beijing to complete the transition to a market economy, scale back the power of state-owned companies, encourage private enterprise and confront rising inequality and environmental degradation.

As remarkable as China’s growth has been over the last three decades, the study suggests that the country’s development pattern has been uneven and is unsustainable. The government, it says, should make significant changes.

“The case for reform is compelling because China has now reached a turning point in its development path,” Robert B. Zoellick, president of the World Bank, said in a speech in Beijing on Monday, when the report was released. “Managing the transition from a middle-income to a high-income country will prove challenging; add to this a global environment that will likely remain uncertain and volatile for the foreseeable future, and the need for change assumes even greater importance.” Read more at NYTimes...

Now Italy's Monti Wants to Save Europe

In November, Mario Monti, the former European Union official and academic, was tapped by Italy’s President to form a government after Silvio Berlusconi’s regime crumbled. At the time, heavily indebted Italy looked like the next domino to fall.

Under Monti as Prime Minister, Italy has done the unthinkable: regained investor confidence. His government has pushed through €20 billion ($26 billion) in austerity measures, and moved to deregulate services and reduce red tape. He’s pursuing plans to simplify the tax code and overhaul rigid labor rules. Helped by the European Central Bank’s liquidity injections into the euro area’s banks, Italy now enjoys lower borrowing costs: The yield on a 10-year bond has fallen by about 1.5 percentage points since Monti took office, easing fears the nation would struggle to pay its $2.5 trillion debt. Monti “has been a game-changer,” says Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.

Italy is hardly solved: Left-wing unions bitterly oppose Monti’s push to change labor laws, growth is almost nonexistent, and that debt isn’t going anywhere. Yet Monti is launching a new crusade: He wants Europe to stop focusing exclusively on austerity and cultivate growth as well. He’s not talking about growth inflated by stimulus packages and more borrowing, rather a program of deregulation that would unleash growth in Europe.

Read More at Bloomberg Businessweek

US turns up heat on China solar subsidies

t the heart of the dispute is the claim that China pays unfair subsidies to its solar companies.
Gordon Brinser of Solarworld Industries America, has called upon President Barack Obama to impose a tariff barrier on the imports of Chinese solar products.

"The incentives that are provided to the Chinese industry are clearly meant for the export of product into foreign industries to basically take over those markets," he says.

But the head of the Chinese company Suntech, the world's largest producer of solar panels, says Chinese firms are not the only ones in the industry which receive government subsidies.

Shi Zhengrong admits he gets research and development grants from the government, but points out that German companies also get subsidised investment from their own government.
"This is a very young industry which requires government support," he says. Read more at BBC News

Shanghai Eases Home Purchase Restrictions

Shanghai eased home purchase restrictions to allow a broader pool of buyers to purchase a second property in China’s financial center, Shanghai Securities News reported today.

The city loosened its definition of locals to let residence permit holders who have lived in the city for at least three years to buy a second home, the official newspaper affiliated with state-run Xinhua news agency said, citing an unidentified official of the city’s housing regulator. It previously limited the second-home option to locals, or those born in the city or who worked for an extended period of time and were officially recognized as locals, without specifying guidelines for non-locals.

“This is certainly a measure of easing,” said Jack Gong, a Hong Kong-based analyst at Jefferies Group Inc. “But the easing by the local government doesn’t mean the central government will loosen its property controls.”

Read More at Bloomberg

Investors Should Cut Risk as Global Woes Add Up: El-Erian

Investors are justified for viewing the Greek debt deal with skepticism and should reduce their risk allocation accordingly, Pimco's Mohamed El-Erian said.

Problems in Greece are just the highest-profile set of geopolitical risks with which the market must deal — the others being Iran and Syria — which could cause disruptions sharply and quickly, said the co-CEO of the world's largest bond fund manager.

"The market is being very rational in saying it's a step but it's not a big enough step yet," El-Erian said of the Greek debt deal announced earlier in the week. "Fundamentally, Greece is going to have to find a way to restore growth and restore competitiveness. If it doesn't do that, private capital isn't going to come in and if private capital doesn't come in you don't get the oxygen that an economy needs."

In addition, the deal, which likely will see bondholders lose more than 70 percent of the principal plus reductions in coupon payments for the Greek notes, faces "implementation risk." The deal still must be approved by components of the Troika — the European Central Bank, the International Monetary Fund and the European Commission — that negotiated the pact. Read more at CNBC

Greek Rescue Leaves Europe Default Risk Alive

Europe is still struggling to avoid the threat of default as investors warned Greece will soon risk violating the terms of its second bailout in three years.

Seven months of negotiations ended in the pre-dawn hours in Brussels with Greece winning 130 billion euros ($172 billion) in aid it needs to avoid a March bankruptcy. Any respite may prove temporary after it signed up to a program of austerity and economic reform aimed at slashing debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.

Even with investors and central bankers chipping in to relieve the debt burden, economists from Citigroup Inc. to Commerzbank AG concluded Greece may again fail to deliver amid a fifth year of recession, looming elections and social unrest. The upshot could be the removal of aid and renewed debate over the merits of fresh assistance before year-end as policy makers shift toward doing more to inoculate the rest of Europe.

Read More at Bloomberg

The Story Behind the Olympus Scandal

The constable behind the counter at the Belgravia Police Station in central London raised his eyebrows in bemusement at the well-spoken middle-aged Englishman, wearing a suit and tie and overcoat, standing before him on a mid-October afternoon. The gentleman had short, receding black hair, close-set eyes, and a generous round chin. He mumbled darkly about Japanese organized crime—the Yakuza—and a corporate scandal he had uncovered in Tokyo. He claimed he had been the president and chief executive officer of a global corporation, had discovered that a fortune had gone missing, and then had been fired. He now had reason to believe, based on what he’d heard from journalists and fellow businessmen, that he might be killed.

The constable nodded, tried not to smile, and thought: This gent may be the biggest nutter we see all day. Most of those who showed up on the other side of the Plexiglas in the public room of the station and claimed to be targets of murder plots tended to be either deranged or exaggerating a petty money squabble. Still, the Metropolitan Police officers are trained to take seriously all such claims, and so the gentleman was shown into a private interview room, an 8-by-6-foot chamber with a desk and two chairs. He sat down across from the constable.

http://www.businessweek.com/magazine/the-story-behind-the-olympus-scandal-02162012.html

5 ways to transform Greece's economy now

Greece's principal problem is that it's been depending for years on selling more and more home-grown goods and services that don't face international competition -- houses, haircuts, insurance policies -- to its own people. That model appeared to work when Greeks experienced a consumer credit boom from 2001 to 2008. But the explosion in domestic demand meant that wages soared, making Greece's exports too pricey on international markets. At the same time, its domestically produced appliances and electronics couldn't compete with cheaper imports from Germany or the Netherlands. Greece also did nothing to overhaul the monopolistic practices in tourism and trucking that further curbed exports.

As a member of the eurozone, Greece can't devalue its currency to restore its competitiveness and boost exports. To grow again, Greece needs to both lower wages dramatically and enhance productivity by de-regulating markets at a wrenching pace.

It's a grinding, politically treacherous task. Still, the number and scope of reforms that Greece has either passed, or promises to pass, in the last few months is indeed impressive.

Let's examine five new measures that would totally transform the Greek economy. Read more at CNNMoney...

Euro Zone Economy Shrank in Fourth Quarter of 2011

Five members of the euro zone, including Italy, fell into recession in the final quarter of 2011, official data showed Wednesday, as the sovereign debt crisis and the imposition of austerity measures discouraged consumers from spending and businesses from investing. But the zone’s two largest economies, France and Germany, held up better than expected.

The 17-nation euro zone contracted by 0.3 percent from the third quarter of the year, Eurostat, the European statistics agency said — the first such decline since the second quarter of 2009. That contraction was smaller than the 0.4 percent economists had expected, but the pain was nonetheless acute among smaller countries and in Southern Europe — ground zero of the debt crisis.

German output fell 0.2 percent in the quarter, less than expected, while France surprised economists with 0.2 percent growth, defying expectations of a decline as exports of Airbus planes bolstered exports and business investment increased. Read more at the NYTimes

Euro-Area Economy Shrinks

Europe’s economy shrank less than economists forecast in the fourth quarter as a better-than- predicted performance in Germany and France helped mitigate the region’s first contraction since 2009.

Gross domestic product in the 17-nation euro area fell 0.3 percent from the prior three months, the first drop since the second quarter of 2009, the European Union’s statistics office in Luxembourg said today. Economists had forecast a drop of 0.4 percent, the median of 42 estimates in a Bloomberg News survey shows. In Germany, Europe’s largest economy, GDP dropped less than economists projected in the fourth quarter, while France’s economy unexpectedly expanded in that period.

German companies have boosted output and spending over the past year to meet export demand, helping soften the impact of tougher budget cuts from Spain to Ireland. While Moody’s Investors Service cut the ratings of six of the region’s member states on Feb. 13, saying policy makers haven’t done enough to restore investor confidence, the economy is showing some signs of stabilization. Euro-region economic sentiment improved in January and services output expanded.

Read More at Bloomberg

Spending Won’t Fix What Ails U.S. Infrastructure

President Barack Obama’s announcement yesterday of a six-year, $476 billion surface transportation reauthorization bill, as part of his 2013 budget, is the latest demonstration of a longstanding presidential propensity for transportation projects.

The U.S. owes its emergence as a great power to magnificent investments in infrastructure. The emerging giant of today, China (TBBLCHNA), is following that example. Many imagine that we must again build big to stay on top. But success in middle-age -- for people and nations -- requires wisdom and cunning more than pumped-up brawn. America’s infrastructure needs intelligent reform, not floods of extra financing or quixotic dreams of new moon adventures or high-speed railways to nowhere.

When the U.S. was new, it had a hinterland with seemingly unlimited natural resources that was virtually inaccessible to the population centers of the East and the markets of the Old World. It cost as much to move goods 30 miles over land as to ship them across the Atlantic. Our first leaders dreamed of building waterways that would open the West; George Washington founded the Potomac Canal Company before he became president. The Erie Canal was a wonder of the age, running 363 miles and paying for itself within a decade.

Read More at Bloomberg

Multifamily Units to Lead U.S. Construction Gains

Construction of multifamily units will lead the U.S. building industry again this year, allowing housing to contribute to growth for the first time in seven years, according to economists Michelle Meyer and Celia Chen.

Work will begin on about 260,000 apartment buildings and townhouse developments in 2012, up 45 percent from last year and the most since 2008, according to Meyer, a senior economist at Bank of America Corp. in New York. Chen, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, is even more optimistic, projecting a record 74 percent jump to 310,000.

Home ownership rates, which have declined to the lowest levels since 1998, may keep dropping as the foreclosure crisis turns more Americans into renters. In addition, household formation will probably accelerate as an improving economy and growing employment embolden more people to stop sharing residences and strike out on their own.

Read More at Bloomberg

Economists Warn of Long-Term Perils in Rescue of Europe’s Banks

Few would begrudge Mario Draghi his boast last week that he and the European Central Bank had prevented a disastrous credit crisis by showering banks with cheap loans in December.

But beneath the gratitude toward Mr. Draghi, the president of the central bank, lurks a fear that the easy money could simply be creating the conditions for another banking crisis several years from now.

Because of the central bank’s cheap financing, some economists warn, sick banks now face less pressure to confront their problems — to clean out bad loans and other impaired assets, or even wind down operations if there is no hope of a turnaround. The European Central Bank, they say, could inadvertently spawn a cohort of “zombie banks,” burdened by nonperforming loans and assets that remain on the books, like the ones that helped make the 1990s a lost decade for Japan.

“It’s a huge bet,” said Charles Wyplosz, a professor of economics at the Graduate Institute in Geneva. “If the crisis ends up well, the E.C.B. will have pulled off a miracle. If things go wrong, then commercial banks will be in a much worse situation than they were before.”

Professor Wyplosz said the central bank might be making the banking system more fragile by encouraging institutions to load up on risky assets, especially government bonds from troubled euro zone countries like Spain or Italy. Banks can use those assets as collateral for more loans from the central bank. Read more at the NY Times

Two twists in the dragon’s tail

China still runs a sizeable trade surplus. But its net exports fell in 2011 (in absolute terms) for only the third time since 2000, subtracting 0.5 percentage points from its growth. Thanks to home-grown spending, China’s economy still managed to expand by 9.2% in 2011, remaining surprisingly strong even in the fourth quarter. This growth owed an unusual amount to consumption (both public and private), which contributed over half for the first time since 2001. As a consequence, the share of consumption in China’s GDP edged up in 2011 after falling for ten years in a row.

The mainstay of China’s growth remains investment, on which its economy remains worryingly dependent. Indeed, when China’s critics are not bashing it for overexporting, they bash it for overinvestment in property. Its housing boom is, however, slowing markedly. China this week reported that the price of new homes fell in 52 out of 70 cities across the country in December, compared with the month before. Households are struggling to obtain mortgages; developers are finding it almost impossible to obtain a loan. The drying up of foreign funds is particularly dramatic, points out North Square Blue Oak, a research firm based in London and Beijing. Foreign capital fell by 65% in December, compared with a year earlier. Read more at The Economist...

As ‘Yuck Factor’ Subsides, Treated Wastewater Flows From Taps

SAN DIEGO — Almost hidden in the northern hills, the pilot water treatment plant here does not seem a harbinger of revolution. It cost $13 million, uses long-established technologies and produces a million gallons a day.

But the plant’s very existence is a triumph over one of the most stubborn problems facing the nation’s water managers: if they make clean drinking water from wastewater, will the yuck factor keep people from accepting it?

With climate change threatening to diminish water supplies in the fast-growing Southwest, more cities are considering the potential of reclaimed water. A new report from the National Academy of Sciences said that if coastal communities used advanced treatment procedures on the effluent that is now sent out to sea, it could increase the amount of municipal water available by as much as 27 percent.

San Diego’s success, 12 years after its City Council recoiled from the toilet-to-tap concept, offers a blueprint for other districts considering wastewater reuse.

For most of the four decades beginning in 1970, the arid West was the fastest-growing region in the country; the population of Nevada quintupled in that period while Arizona’s nearly quadrupled. Continued population growth, unmatched by growth in water storage capacity, makes this a “new era in water management in the United States,” the science group’s report said.

Read More at The New York Times

China's urban explosion: A 21st century challenge

At the end of 2011, China counted over 690 million urban dwellers -- or 51.27% of the country's 1.347 billion people -- according to a report this week from the National Bureau of Statistics. That marks an increase of 21 million from the previous year.

During the same period the rural population dropped by over 14 million to 656 million.

So for the first time, China's urban population now outnumbers the rural population.

"This is one of history's most important population shifts," said Aprodicio Laquian, population expert and professor emeritus at the University of British Columbia in Vancouver.

"It resembles the 19th century Industrial Revolution in Europe, except that in China it's compacted into only a few decades."

Most Chinese traditionally made a living from subsistence farming.

While many still do, their ranks have significantly shrunk.

China's rapid economic growth over the past three decades has expanded the size of China's cities and towns. There are now over 160 cities in China with a population of over 1 million, according to China Today. Read More at CNN.com

Preet Bharara’s toothless bite of Wall Street

Two intriguing magazine cover stories are on the stands this week, on more or less the same topic. New York magazine shows a man clutching between his knees, with the headline: “The Emasculation of Wall Street.” Time’s cover has the impassive puss of Preet Bharara, the U.S. attorney in Manhattan, and “This Man Is Busting Wall St.”

Seeing these two covers side by side, you’d think that Bharara was Wall Street’s Great Emasculator. The Time article is subtitled “Prosecutor Preet Bharara collars the masters of the meltdown,” while the New York piece describes how the Street is reeling from “a crisis that would not be flip to call existential.” Yet nowhere in Gabriel Sherman’s well-researched piece in New York is there even one mention of Preet Bharara.

There’s a simple reason for that:  Preet Bharara is not busting Wall Street. He’s not collaring the masters of the meltdown. He’s done nothing to even slightly discomfit Wall Street’s still-ferocious money machine, or has yet to bring to justice the architects, enablers and continuers of the 2008 financial crisis — the bankers who got us into that mess, and the ones who are continuing to extract pain from foreclosed homeowners, in the New York area and beyond.

Read More at Salon

As Growth Slows, India Awakens to Need for Foreign Investment

When India’s finance minister, Pranab Mukherjee, flew to Chicago recently to address a group of American executives, it was to deliver an urgent message: India is still open for business.

Usually a cautious speaker who offers only vague promises, Mr. Mukherjee eagerly promoted specific new deals from New Delhi, where the national government has become alarmed by the sudden slowdown of India’s economy.

He listed pro-business policies his government recently approved or soon would: foreign individuals could invest directly in the Indian stock market; overseas specialty retailers like Gap could open wholly owned stores in the country, and bigger retailers like Walmart would soon be admitted. And though Mr. Mukherjee did not cite it, he could just as easily have mentioned a proposal the cabinet is considering to let foreign airlines buy as much as a 49 percent stake in India’s airlines.

“I urge you to seize this moment and contribute to our collective prosperity in the times to come,” Mr. Mukherjee told his audience, the World Affairs Council of Chicago.

The flurry of activity by the Indian government has helped push Indian stock indexes up by 15 percent this year, and the rupee has climbed 8 percent against the dollar. Read more at NYTimes

IMF Urges Beijing to Prepare Stimulus

China should be prepared to sharply stimulate its economy if Europe's growth falls more than anticipated, the International Monetary Fund said, adding to expectations that Beijing could turn to spending if conditions significantly worsen.

In its China economic outlook report released on Monday, the IMF urged China to run a deficit of 2% of GDP rather than looking to reduce the country's deficit as planned, given the uncertainty in the global economy.

If Europe's problems turned out to be worse than expected, China should hit the fiscal gas pedal harder. In that case, "China should respond with a significant fiscal package" of about 3% of GDP, the IMF said, including reductions in consumption taxes and new subsidies for consumer-goods purchases and for corporate investments in pollution-control equipment.

However, the IMF warned that Beijing should execute any fresh stimulus through its budget rather than the banking system. China used a four trillion yuan, or about $635 billion, stimulus package in 2008 to help blunt the impact of the financial crisis, in large part through bank lending. Economists now worry China's response to new economic threats could be hobbled if a significant slowdown in growth leads to bad debt on the balance sheets of China's major state-controlled banks.

Read More at The Wall Street Journal

The next special case?

SINCE the start of the euro crisis, a hope has been that a way could be found to support governments that were temporarily short of cash (because of skittish bond investors) but that had public finances that were otherwise sound. The €489 billion ($643 billion) of cheap cash that the European Central Bank lent in December to banks for three years may prove such a scheme. With the promise of more long-term ECB loans to come, borrowing costs for euro-zone governments have fallen sharply, in part because banks have put some of the money to work by buying high-yielding bonds.

It is damning, in such propitious circumstances, that Portugal has not shared in the rush. Even as yields in other trouble spots, such as Ireland, Italy and Spain, have plunged since the start of the year, Portugal’s have risen. In part this is because its bonds were downgraded to junk status on January 13th by Standard & Poor’s, a ratings agency, forcing funds that can only hold investment-grade bonds to sell. The surge in yields on two-year Portuguese bonds is a sign that bondholders fear they will have to accept the kind of losses that Greece is still negotiating with its private-sector investors. When bond prices fall in anticipation of uniform losses, the implied yields on short-dated bonds rise by more than those of longer-dated ones.

Read More at The Economist

An American History Lesson for Europe

In 1789, the political price for our federal constitution included a bailout of the 13 indebted states. But it was by refusing to bail out the states a second time in the 1840s that the United States preserved its federal system, with substantial fiscal independence for state governments. Facing a similar moment, Europe might learn from our experience.

The 1789 bailout was part of a grand bargain designed by Alexander Hamilton to convert the creditors of the 13 states into advocates of a stronger federal government—one having the ability to raise all revenues required to service the large debts that the Continental Congress and the 13 states had both accumulated to finance that "Glorious Cause," our war of independence.

Hamilton and George Washington wanted those debts to be paid. They had to engineer institutional changes to achieve that goal. Under our first constitution, the Articles of Confederation, the continental government had virtually no power to tax. For revenues it depended on voluntary contributions from the 13 states.

Read More at The Wall Street Journal

Man-made and visible from space

“PM2.5” seems an odd and wonky term for the blogosphere to take up, but that is precisely what has happened in China in recent weeks. It refers to the smallest solid particles in the atmosphere—those less than 2.5 microns across. Such dust can get deep into people’s lungs; far deeper than that rated as PM10. Yet until recently China’s authorities have revealed measurements only for PM10. When people realised this, an online revolt broke out. Such was the public pressure that authorities caved in, and PM2.5 data are now being published for Beijing and a handful of other cities.

What of the rest of China? At the moment, only PM10 data are available. But the government’s hand may soon be forced here, too. Though pollution data are best collected near the ground, a plausible estimate may be made from the vantage-point of a satellite by measuring how much light is blocked by particles, and estimating from those particles’ chemical composition the likely distribution of their sizes. And a report prepared for The Economist by a team led by Angel Hsu of Yale University does just that, drawing on data from American satellites to map out PM2.5 pollution across the entire country.

Read More at The Economist

Perverse austerity

THE International Monetary Fund sharply lowered its global economic outlook today and warned that an intensified euro crisis could tip the world back into recession. Its latest forecast is for the world to grow 3.3% this year and the advanced countries 1.2%, sharply lower than it saw just four months ago. Those numbers, it warns, are predicated on a comprehensive solution to Europe’s crisis.

More interesting, and disturbing, are some findings in the IMF's accompanying Fiscal Monitor. Last year was one for fiscal hawks to celebrate as fiscal consolidation proceeded apace. Throughout the advanced economies, budget deficits fell by about 1% of GDP. Only a little of that was due to the cyclical economic improvement. Most was structural, i.e. through discretionary spending cuts or tax increases. That should continue this year, led by America where, even if the payroll tax cut is extended, the structural deficit will decline by 1.4 percentage points.

In the euro zone, Germany, France, Spain and Italy all managed to reduce their structural budget deficits, the latter three thanks to austerity. All are expected to reduce those deficits further this year. But this is not the good news it seems. Austerity, the IMF has found, could be making Europe’s crisis worse, rather than better. Read more on The Economist...

The world in their hands

 China’s obsession with going out in search of raw materials has been growing for almost two decades. In 1993 the country became a net importer of oil. In 2003 it interpreted America’s invasion of Iraq as a grab for oil. And in 2010 it became the world’s biggest consumer of energy. This obsession has dominated foreign policy and reinforced state capitalism. A country that had been turned inward for millennia has started popping up everywhere, and has found that it can change the rules of the game. An economy that had been focused on domestic growth has engaged in a flurry of international acquisitions.


China has been striking deals across the world, often in difficult places that are shunned by the West, in order to lock up supplies of oil and other raw materials. It has an estimated 10,000 workers in Sudan alone. It has provided Russia with a $25 billion export-backed loan to help Rosneft and Transneft to supply it with 300,000 barrels per day of crude, for example, and signed a $1.7 billion deal with Iran to develop parts of the North Azadegan oilfields. China National Petroleum Corporation is one of only two companies to win contracts to develop Iraq’s oilfields. And in December Pakistan named the Industrial and Commercial Bank of China to lead a consortium that will finance a $1.2 billion natural-gas pipeline from Iran to Pakistan. Read more on the Economist