China is the world’s largest country, edging out second-placed India by nearly 100 million people. And with mass of citizens totaling to 1.34 billion, it should be no surprise to see the country exhibit fears of resource scarcity. But it also comes as no surprise to see the Chinese government taking actions to ensure that they have their fair share of global resources and commodities available to them. One example being the announcement of Canadian oil firm Nexen agreeing to an acquisition by China’s CNOOC for approximately $15.1 billion dollars [for more commodity news and analysis subscribe to our free newsletter].
The massive spending does not stop there. “In the past six years, China has spent about $400 billion, about $1 billion per week, on direct investment abroad, much of it focused on commodities” writes Aaron Task. At this point, many investors will be quick to point out that China’s economic growth appears to be screeching to a halt, but even that will not heavily impact the demands and needs of the Chinese population, one economist points out. Simply put, 1.3 billion mouths to feed is a tall order, and is one that the nation is not taking lightly.
All of this plays into a commodity scarcity that has a number of analysts and investors worried, as the world’s population creeps higher and demand for both renewable and nonrenewable resources continues to jump. Some are predicting future wars over certain resources, like oil, while others feel that at the very least political conflicts are sure to arise based on which geographic nations are in need of which resources [see also The Ten Commandments of Commodity Investing].
Though the trends in China may seem far removed from you, don’t write them off as something that does not apply to you as an investor. Below, we outline several funds to help take advantage of China’s commodity spending spree and inevitable demand growth for real assets.
- DB Agriculture Fund (DBA): The most popular futures-based agriculture product in the ETF world, this fund offers exposure to contracts for a wide variety of commodities like corn, soybeans, and sugar. As demand for basic assets and foods like these grows, DBA is sure to reap the rewards.
- Market Vectors-Agribusiness ETF (MOO): Not comfortable with long term futures exposure? Don’t worry, you’re not alone there. Instead, take a look at this fund which invests in global firms who derive at least 50% of their revenues from agriculture. The U.S. is the single largest country allocation, but the fund still focuses more than 60% of its assets overseas, giving MOO a healthy diversity to accompany its clever ticker.
- China Materials ETF (CHIM): This fund features one of a kind exposure to the materials sector of China. Though not all of these companies will directly relate to commodities; the majority of them offer indirect exposure to price changes in the world’s most popular hard assets.
Disclosure: No positions at time of writing.