China has used depressed commodities prices to stock up on long-term supplies of raw materials such as oil, copper, and iron.  And it’s used structural weakness in the U.S. financial system as justification for replacing the dollar as the world’s main reserve currency.

Now, the Red Dragon is looking to make headway on the highway by winning global market share in the automotive market while U.S. heavyweights spin out.

“We aren’t afraid of the financial crisis,” Zhou Fuquan, vice president of Geely Automobile Holdings Ltd. (PINK: GELYF), told Bloomberg News. “On the contrary, we hope it will penetrate even further as it has provided us with some opportunities.”

Geely is China’s biggest private automaker, but that isn’t exactly saying much. The company’s annual output is just 300,000 units, and its market share in China is a meager 3%. Still, Hangzhou- based Geely is determined to become a global player in the auto industry. It has ambitions to sell 2 million cars a year, including 1.3 million overseas – even though right now the company generates just 5% of its sales from abroad.

Of course, that’s why the financial crisis has been more of a financial opportunity for Geely. In March, Geely bought key assets from bankrupt Australian gearbox maker Drivetrain Systems International – the world’s second-largest maker of automatic transmissions.

“The economic downturn provides us with very good overseas acquisition opportunities,” Daniel Dai, vice president for international business at Geely, told China Daily. “We get the best technology with the best price.”

Geely has also set up a joint venture with Manganese Bronze Holdings PLC (MBH) to produce the TX4 London Taxi in Shanghai. MBH supplies taxis to Saudi Arabia, Turkey, and Spain as well, boosting Geely’s global presence.

For months, analysts have speculated that Geely will continue to its overseas expansion by launching a bid for Ford Motor Co.’s (NYSE: F) Volvo unit. Ford, which is the only “Big Three” auto company to not receive government aid, last December started looking to offload the Swedish car brand in an effort to pay off the debt it accrued when the company borrowed $23.5 billion in 2006.

Geely said on Sept. 9 that it might partner with a state-owned investment company to bid for Volvo. And earlier this week, the company announced that it would raise $334 million in funds from Goldman Sachs Group Inc. (NYSE: GS) through a convertible bond offering to “fund the capital expenditures of the group, potential acquisitions by the group and for general corporate purposes of the group.”

However, some analysts have pointed out that the Goldman capital falls well short of the roughly $2 billion Ford is asking for Volvo. They believe Geely instead will use the money to increase capacity and market the models it already has to buyers outside of its home market.

“The management is planning to expand its distribution channel to foreign countries,” Richard Li, research director at Celestial Asia Securities Holdings, told Forbes magazine. “This deal can provide this company enough funds so that the cash flow will be upgraded long term.”

And if nothing else, Goldman’s investment could be enough to instill investor confidence in the small Chinese carmaker.

Almost a year ago to the day Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) subsidiary MidAmerican Energy Holdings Co. agreed to pay roughly $230 million for a 9.89% stake in Chinese car and battery producer BYD Co. Ltd. Since then, BYD’s shares have jumped more than fivefold in that time.

“A big name investor certainly helps boost stock prices and brand recognition,” Li Lixi, a Northeast Securities Co. analyst in Shanghai, told Bloomberg. “Goldman’s investment in Geely may repeat the impact that [Warren] Buffett had on BYD.”

Geely’s Hong Kong shares yesterday (Wednesday) surged to their highest in more than nine years on the news of Goldman’s investment.

The Race to Build a Competitive Chinese Brand

Geely isn’t the only Chinese companies looking to use the financial crisis as an opportunity to broaden its global reach either. Other Chinese companies, including Beijing Automotive Industry Holdings Co. (BAIC), SAIC Motor Corp. Ltd., and Sichuan Tengzhong Heavy Industrial Machinery Co., are determined take the lead in what has become a race to be the first world-renowned Chinese automotive company.

“It takes decades to establish a recognized, renowned brand,” Jim Hossack, an industry analyst at researcher AutoPacific Inc., told Bloomberg. “China wants to do it much faster, perhaps within as little as five years.”

BAIC on Sept. 9 joined Koenigsegg Group in its bid for GM’s Saab division. Koenigsegg – backed by U.S. and Norwegian investors – in June agreed to buy Saab from GM, but struggled with financing the deal.

SAIC group, the parent of China’s largest automaker, had also considered coming to Koenigsegg’s aid in the Saab bid. But ultimately it was BAIC that came through with the $420 billion in financing needed to close the deal.

“This is a great opportunity for us to partner up with a brand like Saab that we believe has a great future with a new business plan and new ownership,” Wang Dazong, general manager of Beijing Auto, said in a statement posted on its Web site.

Koenigsegg and BAIC will form a joint venture to market Saab cars in China, where the brand has little-to-no presence. BAIC will also gain valuable technology from the Swedish car company.

“Chinese manufacturers are hoping to buy up technology that will help them catch up to world standards on both the product and the development side more quickly than they would on their own,” Christoph Stuermer, automotive analyst at IHS Global Insight Inc., told the Financial Times.

However, not every Chinese endeavor has been greeted with success. Shanghai-based SAIC in 2004 paid $500 million for 49% of Ssangyong Motor Co. just to watch the South Korean carmaker go into receivership in February. And Sichuan Tengzhong Heavy Industrial Machinery’s attempted takeover of GM’s Hummer brand is still being stalled by China’s central government.

“It’s not in coordination with our nation’s industrial policy,” Vice Minister of Commerce Chen Jian said after sending back Sichuan’s application to acquire the Hummer brand for $100 million.

Still, Chinese auto companies won’t be satisfied until they race ahead of their Western counterparts.

“I’m fighting for what’s in overseas automakers’ rice bowls,” Geely founder Li Shufu told Bloomberg. “I want to build Geely into a global first-tier automaker.”

Source: Financial Crisis Gives Chinese Car Companies a Chance to Get Up to Speed

Traders were squaring long U.S. dollar positions ahead of Wednesday’s Fed decision and first-quarter GDP release, according to Michael Woolfolk, senior currency strategist at Bank of New York Mellon (NYSE:BK).

“The event risk of these events may limit appetite for fresh U.S. dollar exposures, with renewed U.S. dollar buying likely to resume if first-quarter GDP disappoints or the Fed announces further QE [quantitative easing] measures,” Woolfolk said.

The day’s numbers provided some support for an expansion of risk.

The Conference Board reported that its U.S. consumer confidence index jumped to a reading of 39.2 in April from 26.9 in March. The month-over-month gain was the fourth-largest ever in the 32-year history of the survey.

At the same time, Standard & Poor’s Case-Shiller home price index declined in February, as home prices in 20 major cities fell 2.2%. But that was good news of sorts, since it was less than the 2.8% drop in January. It was also the first time in 16 months that the year-over-year decline in prices did not set a record.

For what it may be worth, prices are “no longer falling off a cliff,” wrote Patrick Newport, of IHS Global Insight. “Instead, they are rolling down a steep hill.”
Source: Euro Gains on Dollar

The day was full of very shaky economic data, led by the Conference Board’s report that its consumer confidence index declined to a record low of 38 in December, from a revised reading of 44.7 last month. That was well below economists’ expectations, which were for a modest rise to 45.8.

“The further erosion of the consumer confidence index reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008,” wrote Lynn Franco, director of the Board’s Consumer Research Center. “The overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half.”

The consumer confidence subindex for present conditions plummeted to 29.4 in December from 42.3 in November, the Board said.

Meanwhile, home prices in 20 major U.S. cities dropped 2.2% in October from September, and fell a record 18% from the previous year, according to the Case-Shiller home price index, as reported by Standard & Poor’s. That sends prices back to their March 2004 levels.

Falling prices are likely to accelerate in coming months, said Patrick Newport, economist at IHS Global Insight. “The main force driving house prices down is foreclosures, which are still rising,” Newport wrote. “The Obama administration and the Fed are working on ways to limit the number of ‘preventable foreclosures.’ Unfortunately, trial and error will be part of this process.”

Source: Dollar Slides Against Euro

The day’s big number was the Labor Department report showing that producer prices fell 2.8% in October, the most in at least 50 years.

The headline number was slightly misleading, however, as the plunge was triggered by a 24.9% drop in gasoline prices, a record freefall going back to 1947, when the government first began keeping track. Outside of food and energy, prices were actually up, by 0.4% in October.

But Nigel Gault, economist with IHS Global Insight, downplayed the core figure, saying that, “We saw huge commodity price increases really through the middle part of this year … It took a long time for that to start feeding though into the core inflation. So we’re probably seeing the last gasp of the inflationary implications of the previous price hikes.”

While Gault admitted he’d prefer a lower core rate, he added that, “One reason I’m not so concerned is that over the past two months there’s been an upward contributions to core from the vehicles component, and the vehicles component is very volatile from month to month … How likely is it that manufacturers would be able to pursue a price increase for light trucks? So I view it as a temporary increase.”

And Ian Shepherdson, economist with High Frequency Economics, predicted “further sharp declines” for inflation in November, however, “Needless to say this is all about energy prices.”

Source: Dollar Little Changed Against Euro