China Stockpiling Commodities Over Potential US Dollar Collapse

Owing hundreds of billions of dollars of U.S. debt has China rightly concerned, as the long-term performance of the greenback could cost them billions of dollars in losses, as the U.S. dollar loses its value.

In response, China has started buying a large amount of raw materials at a fast pace in order to hedge against that real possibility.

Some of the recent commodity buys include 400,000 tons of copper acquired in April, a record level for China. Also in April iron ore imports rose by 57 metric tons. Over a 6-year period China has also increased its gold reserves to 1,054 tons, up from the 600 tons of gold they held in 2003.

This is why a large number of leading commodities investors like Jim Rogers warn people to get out of dollar-denominated investments and move to safer and more lucrative possibilities. That’s exactly what the Chinese are doing here.

This is a challenge for China, as they’re somewhat stuck at this time, because they were largely financing the U.S. consumer binge that generated a lot of wealth for years, by buying U.S. debt. That also provided the circumstances where Chinese manufacturers churned out inexpensive products to sell to American consumers.

So while they hold the U.S. debt, exports have shrivelled up because American consumers have obviously cut back on their spending, making their risk very high at these debt levels, with far less being received back in return.

For that reason they have also started to focus on infrastructure projects of their own to stimulate the domestic economy, while they’re in this precarious situation.

Some of the reasons for this are obvious, as I mentioned above, but another reason I think China is doing this at this time, is commodity prices are going to soar in the years ahead, and they are buying at bargain prices at this time in preparation for that.

This is another reason to see why we all need to put at least a small percentage of our investments into commodities.

Source by Taylor Raimee