As the dollars keep piling up in China, there is a need to put the money to work. So how about oil? No doubt, China needs this vital commodity as its economy continues to grow at a rapid clip. Consider that the country imports roughly 3.6 million barrels of oil a day -- and this will inevitably increase in the coming years.
To gear up for things, China National Petroleum Corp. (CNPC) -- which is the parent company of PetroChina (NYSE: PTR) -- secured a $30 billion loan from the Chinese government. Apparently, the interest rate was fairly low (the loan term is five years). And, yes the money will be used to buy up energy assets across the globe.
As oil prices have moderated -- and equity valuations have fallen -- the timing looks good. But then again, China is looking to the long-term and realizes it needs to make big investments to secure its energy future.
Despite all this, getting capital may be the easy part. Rather, if history is any indication, China is still likely to confront serious political pushback (just recently Rio Tinto rejected a $19.5 billion deal from Chinalco). After all, do other countries want to sell their rich energy assets off -- even if the price tag is attractive?
Tom Taulli is the author of various books, including The Complete M&A Handbook
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