Put yourself in China's shoes.
You see exploding sovereign debt and fiscal deficits in the West stretching for as far as the eye can see, and still, the root causes of the entire global crisis have merely been swept under the rug. As a result, you know that the currency at the epicenter of it all is eventually headed lower still.
What do you do?
Simply stated, you spend.
You embark upon a shopping spree of epic proportions, scooping up every strategic asset of enduring value that you can get your hands on. You buy now, in droves, the things which you know will cost more in the future. To leverage your forward-looking strategy, you direct your state-owned enterprises (SOEs) like CNOOC (NYSE: CEO ) and China Petroleum & Chemical (NYSE: SNP ) to scour the globe for resource investment opportunities, and encourage the private sector to follow suit with deals like Yanzhou Coal Mining's (NYSE: YZC ) Australian coal purchase.
You sustain a dramatically increased volume of commodity imports beyond anyone's prior expectations, boosting the outlook for well-positioned suppliers like Peabody Energy (NYSE: BTU ) . With trading partners as far afield as Brazil, you hatch plans to move away from the U.S. dollar as the default settlement currency.
Meanwhile, the sheer scale of emergency spending by your sovereign competitors has afforded you an opportunity to indulge in a stimulus package of your own. You focus the effort squarely upon the industrial sectors that form the core of your economic machine.
Recognizing the persistently toxic nature of derivative "assets" purchased from Western financial institutions, you empower your SOEs to unilaterally walk away from derivative contracts, in a bold move that will help to send gold prices higher and make shares of miners like Barrick Gold (NYSE: ABX ) surge abruptly. Following a truly surreal silence in the global media regarding a $134 billion counterfeit bond caper, you are perhaps not a bit surprised to see that your direct challenge to the entire framework of a $600 trillion notional derivatives market became the other most overlooked story of 2009.
At the end of the day, your coffers are filled to the brim with the ingredients of future prosperity, and you have alleviated some measure of your exposure to further downside in key global currencies like the dollar. If you can pull that off, keep your economy expanding at an 8% clip, and even help to spark some recovery among your neighbors and strategic trading partners in the process, well, then you just might have done something worthy of consideration as the most overlooked financial story of 2009.
OK, put your own shoes back on
I'm sure it suits China just fine that much of the world may fail to recognize the collective enormity of these strategic initiatives underfoot. If everyone understood what was happening from a broad perspective, commodity prices could rise even faster than they have. Perhaps it is fitting, then, that we closed the year with one more rather quiet response to China's strengthening relationship with yet another resource-rich nation: Ecuador.
Chinese business interests visited Ecuador in November to explore avenues of bilateral cooperation. The result? A joint venture between Petroecuador (60%) and Sinopec (40%) to exploit a 120-million-barrel oil block in the Amazonian province of Pastaza.
Having lived in Pastaza myself, and after witnessing firsthand the destruction of tropical rainforest habitat and related impacts upon indigenous populations that have historically accompanied oil projects in the Amazon, I consider this an opportune time to remind Fools of the potential consequences of this trend. If China sets off a global stampede to secure and exploit natural resources at maximum velocity as the default response to a continuing currency crisis, our planet could become the ultimate victim of the post-Bretton Woods experiment with unbacked fiat currency.
While Ecuador is known for its oil, Canada's Corriente Resources has explored and delineated portions of an extensive copper belt in southeastern Ecuador that was originally prospected by BHP Billiton (NYSE: BHP ) . Corriente recently announced that a joint venture between China Railway Construction Corp and Tongling Nonferrous Metals has issued a $649 million cash bid to acquire Corriente.
The ore bodies delineated from drilling to date suggest a potential resource of more than 25 billion pounds of copper. If those early resource estimates hold up over time, that pair of Chinese companies may have just grabbed the equivalent of one-fourth the entire copper stash of Freeport-McMoRan (NYSE: FCX ) for less than $0.03 per pound. As a reminder, above-ground copper presently changes hands at almost $3.40 per pound.
Say what you will about the sustainability of China's unrelenting growth rate, but I submit that China's strategic adaptations to the global financial crisis collectively constitute the most overlooked and misunderstood financial story of 2009. The end result of these measures, furthermore, may ultimately shape the biggest stories of the decade to come.
Now that you have walked a mile in China's shoes, it's time to don your thinking cap. Vote in our Motley Poll for your choice of the most overlooked story of 2009, or nominate an alternate selection using the comments section below.