China May Wade Into Western Car Market

China can afford to play a long-term game in its competition with Western governments and the industries that are considered strategic to their economies.

China has already put money into huge metals and mining company Rio Tinto (RTP). The government is also beginning to lock up oil reserves by providing capital to national oil companies around the world for drilling and recovering crude . According to The Asia Times, China signed a $10 billion “loan-for-oil” deal with Petrobras that guarantees China up to 160,000 barrels a day at market prices. Now, it appears that China wants to be a major player in the global automotive industry. It may finance the buyout of Volvo, a division of Ford (F). The Times is reporting the Chinese car firm Geely may purchase  the car company that was originally based in Sweden.

It may take a number of years for worldwide light vehicle sales to recover to their 2006 levels. But, if  China can acquire enough brands and manufacturing assets in the West inexpensively, it may be in a better position to benefit from a recovery that any of the US or European-based firms.

Douglas A. McIntyre