Sunday, September 13, 2009

China is now buying US distressed real estate (better than & not riskier like US Treasuries) - standing taller & a threat

Speaking of China's current account surplus, the dragon nation now seems all set to take advantage of the cheap real estate available in the US currently. As per a Moneynews report, China's US$ 300 bn sovereign-wealth fund (SWF) is preparing to aggressively scoop up distressed real estate assets in the US, a smart move considering that with the impending hyper inflation in the US, real estate surely looks a better investment than US Treasuries.

Interestingly, the vice president of the Bank of China has recently been quite vocal in his criticism of Wall Street for its complacency in the wake of the financial crisis. He is known to have said recently, "You go to Wall Street, the people feel the crisis never happened. It's not only overconfidence, it's over-myopic. This is too much." Looks like Wall Street's arrogance isn't going to take a lot of time to come back!

And now, another American bastion has fallen. As per Moneynews, such has been the damage done to corporate earnings in the US following the crisis that for the first time, profits posted by the top 500 Chinese companies have gone way ahead of their US counterparts. Net profits for the Chinese companies stood at US$ 171 bn in 2008, significantly higher than those posted by the US companies, which came in at US$ 99 bn. A big achievement for China indeed as while it remains the fastest growing economy in the world; its GDP is still less than a third of the US.

And once again, it is the banking industry that seemed to have made all the difference. While many of the US banks remained mired in losses, half of the top 10 profit-makers on the Chinese list turned out to be financial companies. Clearly, the US' banking industry has left its economy nowhere to hide.

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