China, Raising the Ante
Research for Online Investors

by John Dalt

2/10/10

China is raising the ante on anyone that dares to disagree with their great leap forward.  According to China Daily, the government’s English Newspaper, four Rio Tinto employees have been charged with bribery.

The four are charged with “taking advantage of their position to seek profit for others, and asking for, or illegally accepting, huge amounts of money from Chinese Steel enterprises.”

Except for the ‘Chinese Steel’ part of the charge, most charity fund raisers should be cautious of their travel plans.  It seems the four are charged with ‘luring’ plant managers of steel plants to give them commercial secrets, and money.  Rio Tinto is the world’s second largest iron ore supplier and has reopened their office in China.  Rio Tinto is expected to announce that all business negotiations will occur in Australia or London, at their headquarters, in the future.

In November of 2009 China’s state oil company, China National Petroleum Corp., signed a development deal with Sudan for three new oil and gas cooperation agreements.  The agreements expand a refinery, swap equity in two production blocks and an advance payment for crude trading.  There were a total of eight agreements signed on November 17, 2009 in the presence of the Sudanese Vice President and a member of China’s Central Committee of the Communist Party.  The agreements contained a loan of 230 million Yuan with interest, 80 million Yuan interest free, and an 80 million Yuan grant.  It may be lost on me, but on the surface it seems important that these agreements were signed in Khartoum rather than China.  Payments such as these could be misunderstood.  You can read more in the European Coalition for Oil in Sedan news section.

Dongfan Greg Chung was sentenced to 15 years in prison on Monday in Los Angeles.  Chung was an employee and later a consultant to Boeing Aerospace.  He was convicted of economic espionage, taking more than 300,000 pages of restricted documents from his employer.  The documents were discovered at his home, by the FBI, along with letters, lists and journals detailing his contacts with Chinese officials.  The documents contained information on the space shuttle, and other military hardware such as the Delta IV rocket, F15 fighter, B-52 bomber and Chinook helicopter.  Chung said he took the documents because he wanted to write a book.

The U.S. administration announced arms sales to Taiwan, including UH-60 Black Hawk helicopters.  This has upset China as they consider Taiwan a ‘breakaway' province.  The Communist mainland maintains the right to take Taiwan by force if they ever declare independence from the mainland.  China has cancelled U.S.-Sino military meetings and threatened sanctions against U.S. manufacturers that sell military hardware to Taiwan.

Many investors own stocks in Chinese companies. We own two in our Long-Term Portfolio. I cautioned our subscribers, this may not fit your risk tolerance. You are entering a partnership with the government, and businesses will respond to directions from the communist party that may not be in your interest.

Tomorrow we make awake to a surprise.  That is the promise of the Supreme Leader Ayatollah Ali Khamenei of Iran.  Addressing Air Force leaders, he said “The Iranian nation, with its unity and God’s grace, will punch the arrogance [Western powers] on the 22nd of Bahman [February 11] in a way that will leave them stunned.”  Can’t get much plainer than that!  Who knows what the ‘supreme leader’ has in store for the arrogant nations?  We certainly don’t, but are always wary of threats made by despots with weapons and armies.  Maybe it will be to turn their weapons on citizens that plan protest marches against the Islamic regime.  We will have more tomorrow after the ‘punch’ is delivered.

“Diplomacy is a continuation of war by other means.”---Zhou En Lai

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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