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Sunday, January 09, 2011

Mailbag: Bear Trader: Why the Chinese want to buy Spanish Debt Explained

Part of the deal with Spain is that the Spanish oil exploration - drilling - production company Repsol gets chunked up some and China gets to buy majority stakes in various pieces. That is, the Spanish Government and Repsol are negotiating with China and Sinopec, the Chinese entity functionally similar to Repsol, to sell China the pieces of Repsol China is interested in. So, China buys Spanish Government bonds and then is allowed to buy the latest deep water drilling technology as well as a lot of other fully modern oil technology from Repsol.

Repsol and Sinopec have already set up a joint venture in Brazil, including the very deep very large under open ocean "pre-salt" deposits off the north shore. Sinopec gets all the technology it wants to copy, naturally.

The East Asian continental shelf appears to be loaded with oil. China is setting up to monopolize any off shore oil production from the Sakhalin Islands south to the Bay of Thailand. This is why they are developing/making new aircraft carriers, stealth fighter - bombers, anti - ship (anti US Navy aircraft carrier, actually) highly sophisticated terminally guided ballistic missiles, etc. China at this time launches more military payloads into earth orbit than does the USA. Japan, Korea, Taiwan, the Philippines, and Viet Nam are very alarmed. Looking at what China is doing militarily it looks like China plans to control the Pacific west of Guam.

And that is why China buys Spanish bonds. Besides showing the European Central Bank and the Bundesbank who is the top dog, that is.

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