InvestorPlace Asia

Driving Demand for Natural Resources

China truly took advantage of the global economic slowdown -- the nation locked in deals to secure vast amounts of natural resources around the world, practically without any competition. In fact, the recession was actually a buying opportunity for China to purchase commodities with the piles of U.S. dollars from its trade surplus.

Now, there are three main reasons why China is acquiring mining and energy assets around the world at a quickening pace…

First of all, China requires substantial natural resources in order to maintain its high economic growth rate. The country's infrastructure investments and construction projects -- spurred on by China's massive stimulus package -- need iron ore, copper, aluminum and other industrial metals. This strong demand has made China the world's biggest consumer of iron ore, steel, cement and copper. And it's number two in oil consumption; though, it will likely overtake the number-one spot soon -- especially when you consider that China overtook the U.S. to become the largest car market in the world last year, keeping energy demand strong.

Secondly, the Chinese government is flush with cash. As a result, China can afford to pay a premium price for strategic mining assets through SOEs such as our former recommendation China Aluminum (NYSE: ACH) that we sold for 181% gains in six months, which made several major acquisitions in the first half of 2009. The company is willing to pay a premium for industrial metal mines that Chinese policymakers believe are important for China's economic growth.

The third reason China's acquisition is accelerating has to do with the country's expanding clout on the world stage. China's non-judgmental style of foreign aid has made the country popular in resource-rich Africa. In fact, China has replaced the U.S. as the number-one source of foreign aid there. And in exchange for China's generosity, African countries such as Nigeria and Zaire have handed the Chinese preferential access to develop valuable oil and mining assets. This is also taking place in the Middle East and Latin America, where natural resource-rich nations are increasing their cooperation with China.

• Positive Demographics in China
• Yuan Currency Appreciation
• Transformation from Factory to Market of the World
• Driving Demand for Natural Resources
• China as a Global Economic Superpower
• Countries Benefiting from China Spillover Effect
• China is the Engine of the Global Economy