China Chases Natural Resources

The business news takes a global bent today with stories about China and Swiss firms filling top spots. The New York Times reports that China is aggressively growing its influence in Latin America with a focus on securing natural resources, such as oil, soybeans, and iron ore. "In recent weeks, China has been negotiating deals to double a development fund in Venezuela to $12 billion, lend Ecuador at least $1 billion to build a hydroelectric plant, provide Argentina with access to more than $10 billion in Chinese currency and lend Brazil's national oil company $10 billion," the NYT says. Activity over the past decade has boosted China into the numero dos spot as Latin America's largest trading partner after the United States. "This is how the balance of power shifts quietly during times of crisis," David Rothkopf, a former Commerce Department official in the Clinton administration, tells the Times. "The loans are an example of the checkbook power in the world moving to new places, with the Chinese becoming more active."

In a separate story, the Obama administration is doing some major back peddling when it comes to criticizing China, rescinding previous accusations that the country undervalued its currency "in order to increase its exports at the expense of American producers." In a new report to Congress, Treasury Secretary Timothy Geithner actually praised China for its own economic stimulus program and the country's "move toward a more realistic exchange rate for the yuan." In contrast, the paper points out that President Obama "repeatedly accused China of outright currency manipulation" on the campaign trail with Geithner making the same critique at his confirmation hearings. "The new report highlighted the political and diplomatic constraints that the Obama administration faces in dealing with China."

And though the Wall Street Journal leads with a story on how lawyers are reaping the big bucks representing Lehman Bros. in the firm's bankruptcy proceedings, further down it too turns its eyes to China. On Wednesday, shareholders of Rio Tinto, the Australian mega-miner, scrutinized a deal shook on in February giving state-owned Aluminum Inc., aka Chinalco, an 18 percent stake in the company for a record $19.5 billion. Before the ink had dried, the head of Chinalco, Xiao Yaqing, moved into politics as aluminum czar, raising "a critical question about China's state-owned corporate giants as they step onto the global stage: Are they driven by profits, or are they pursuing a nationalist agenda for the Chinese government?" According to the WSJ, "a close look at the Rio Tinto deal suggests that the answer is both, as business and politics intertwine for a new breed of globally savvy Chinese executives." The deal is now being hamstrung by political jockeying, fueled in part by Australia's ties to China. Whether it will get regulatory approval from Australia remains to be seen.

Wrapping up today's coverage of China, Reuters reports that China's first-quarter growth of 6.1 percent was the weakest on record and fell below economists' prediction of 6.3 percent. However, a "pick-up" in March led analysts to believe China was on the up and up. "A surge in lending and public spending cushioned a collapse in exports, suggesting that while Beijing may yet do more to prop up demand, it need not launch a new stimulus package on the scale of its $585 billion plan announced last year."

AIG is also making the headline rounds with news that it is nearing a sale of its car insurance unit popping up in Bloomberg, the Financial Times, and Reuters. The buyer is rival Zurich Financial Group and the price tag: $2 billion. The FT says that according to an unnamed source, the deal could be finalized within days.

BusinessWeek gives UBS top priority with a story on ongoing woes at the Swiss bank. Yesterday, it announced a $1.74 billion net loss for the first quarter and 7,500 more job cuts worldwide by 2010. When all is said and done (assuming there won't be more), UBS will have slashed its workforce almost 20 percent since 2008. "Rubbing salt into the wounds, clients moved $20 billion out of UBS' wealth management division in the first three months of 2009—a sign that losses from its investment operations have taken a toll on the bank's reputation." Part of the losses have to do with the bank's admission of helping U.S. clients evade taxes, which led to a $780 million settlement in February with the U.S. Department of Justice.

Lastly, Bloomberg reports that General Growth Properties, the second-largest mall owner in the country, has filed for Chapter 11 bankruptcy after failing to refinance more than $27 billion of debt, "most of it racked up through acquisitions." In the filing, the company listed $29.5 billion in total assets and debts of about $27.3 billion, making it the largest real estate bankruptcy in U.S. history, according to Bloomberg. The Chicago-based company lost 81 percent of its market value in six months. Its shares closed on the NYSE yesterday at $1.05, valuing the company at $329 million. Share in March 2007 traded as high as $67. General Growth owns more than 200 shopping malls.