Well if you didn't know that the mining boom had peaked, yesterday made it official. Capital spending fell 4.7% in the March quarter, according to the Australian Bureau of Statistics (ABS). The huge pipeline of resources investment has tapered off. If this is the case, one of the key supports of a strong Aussie dollar - big foreign capital flows for resource projects (especially LNG) - has been kicked out.

But markets look forward, not backward (like Remembering the Future, which looks forward by looking backward first). The survey by the ABS showed that Aussie businesses still plan on spending about $150 billion on new projects in the next 18 months. That's still a lot of money, even these days, which partly explained the bounce the Aussie dollar received in the afternoon.

Still, the value of paper money is variable, no matter the nominal amount printed on a note. Take the 1 Yuan note below. Your editor found it lying in the gutter on St Kilda Road yesterday on the way to work. It was out front of one of the long-stay hotels frequented by large Chinese tour groups in Melbourne.

Throwing it into the gutter is no way to treat one of the world's next potential reserve currencies. Besides, the Yuan and the Aussie dollar are now directly convertible, based on a deal made last month. At current exchange rates, the note above would be worth about 17 cents. You can't buy much of anything in Australian for 17 cents. But it's a start.

And speaking of starts, the Chinese are in talks with New Zealand to make the Yuan directly convertible with the New Zealand dollar. New Zealand does about $15.3 billion in trade each year with China, according to the Wall Street Journal. In fact, China could soon replace Australia as New Zealand's top trading partner.

Trade between Australia and New Zealand was around $16.8 billion last year. But for China, New Zealand is a great source of meat, milk powder, and wool. It's like a giant green jewel in two pieces, filled with all the food a hungry nation requires. Both Australia and New Zealand are huge strategic resources for China.

China hasn't been idle on the acquisition front, either. Earlier this week, China's Shuanghui Holdings announced a $4.7 billion takeover offer for US-based Smithfield Foods Inc. Smithfield is the world's largest pork producer. The bid has the backing of Goldman Sachs and Singapore's Temasek Holdings.

It's hard to calculate the net present value of calories derived from bacon. And perhaps it's not necessary. Bacon is delicious no matter the price. But is Shuanghui interested in Smithfield because it's a profit making enterprise...or because food is a strategic asset valued by China's leadership? After all, Shuanghui is run by Wan Long, a member China's National People's Congress.

This is really a version of whether it's better to invest in objects of permanent value (like bacon) or productive enterprises. Of course it takes a productive enterprise to extract commodities at a profit. But really what we're asking is where the value resides in this deal: food security or shares in a company?

Regards,
Dan Denning
for The Daily Reckoning Australia