Working For The Yankee Chinese Dollar

That most Irish (or should that be Oirish?) of institutions, Guinness, may be about to become a little more exotic. As will other familiar brands such as Baileys and Smirnoff. For the China Investment Corp (CIC) has taken a 1.1% stake in their owner-Diageo. This might not sound a lot, but the deal, valued at 365 million dollars, actually makes CIC Diageo’s ninth largest shareholder.

The CIC was set up to make good use of China’s 2 trillion dollars worth of foreign currency reserve. Traditionally markets have been sceptical and somewhat resistant to investments by these so-called sovereign funds. However, according to the Financial Times, they have “softened” their attitude to Chinese money. Read that as beggars can’t be choosy. In these economic times, Diageo and their ilk can’t afford to worry about where the money is coming from. If it’s the largest dictatorship on Earth, so be it. To be fair, judging by past standards, it’s doubtful if they ever/will care.

The Chinese drinks sector is an expanding market and it makes sense for the CIC to want a share of it. Indeed, the Chinese government likes to take a stake in any large foreign operator trading on their soil. So it comes as no surprise that the FT also reports that the CIC have a 0.5% shareholding in Tesco-well I suppose, every little helps.


Cooking Lager said…
The Chinese are in a difficult position. They have too many dollars and an unsustainable balance of trade surplus propping up their own manufacturing as well as the dollar, and aquiring more dollars daily that if they dump would trash the global economy. The only way out is for china to spend there dollars in the west, and it is no surprise to see asset aquisition.
Chinas going decadent - Coke sales are rocketting - perhaps hard pressed pubs should go for the Chinese market
linda said…
It's even more complex than that. The Chinese are desparate to escape the "dollar trap." That is the large surplus of dollars thay have ammased with their strong international trading. They are under pressure to see more real returns for internal Chinese business and the only way to do that is to divest of the dollars and make the Yuan a world currency.

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