While the rest of the world is grappling with the global slowdown, China is figuring out ways to exploit it.

Over the past few months, China has capitalized on the financial turmoil that has paralyzed the world’s “developed” economies by stocking up on cheap commodities, weeding out competition to its largest state-run companies, and acquiring even more foreign assets.

Indeed, with China’s economic growth projected at an enviable 8% for this year, that country’s government has been able to spend less time promoting immediate growth and liquidity, and more time preparing for the economic renaissance that almost certainly seems to be the Asian giant’s destiny.

By exposing Western free-market capitalism, undermining the United States economic clout, and eviscerating commodities prices, China is using the financial crisis as the perfect opportunity to advance its domestic agenda.

That agenda begins with the recently unveiled $586 billion stimulus plan - a plan primarily focused on infrastructure.

China’s financial institutions have little or no exposure to the toxic subprime assets that spawned this current global crisis. Thus, instead of having to spend hundreds of billions of dollars to bail out its banks, China can choose develop the stage on which it will display its future economic might.

And the first phase of that plan is key: Before its plans for a massive infrastructure overhaul can be realized, China must first load up on the raw materials crucial to its execution.

With Prices Down, China’s Stocking Up

Prices for commodities like aluminum, copper, iron ore and oil are all down substantially from last year as the global financial crisis has torpedoed demand. And now that prices have gone down, China’s commodities stockpiles are going up.

Imports of copper, iron ore, and oil all rose in December, as China took advantage of low commodities prices:

• Iron ore imports were up 6.2% in December, on a year-over-year basis.
• Copper imports were up 19.3%.
• And imports of crude oil climbed 11.6%.

“The authorities are thinking about the issue from a strategic point of view,” a senior researcher at China’s State Reserve Bureau (SRB) told Reuters. “As almost all raw material prices went sky-high in the last few years, China has not built up some of the key state reserves. Now is a much better time to stock up.”

The government announced last month that it would purchase of 290,000 metric tons of aluminum from eight of the nation’s largest smelters at about $1,806 a ton. And on Jan. 13, representatives from the SRB again met with domestic smelters, this time to discuss plans to build a stockpile of up to 300,000 tons of zinc - a metal used in galvanized steel.

A 300,000-ton zinc reserve could cost about $494 million (3.36 billion yuan), based on recent spot prices of $1,630-$1,640 a metric ton, as quoted on the Shanghai Nonferrous Metals Market.

Market participants speculate that the government is also mulling a 200,000-ton copper reserve, now that prices for that metal have tumbled more than 50% from a record $8,940 a metric ton last year.

“China will buy copper for its reserves,” SRB Executive Director and Vice President Wang Chiwei said at a conference in Shanghai.

Prices right now are “attractive,” Wang added, noting that purchases would “suit national interests.”

Chinese copper demand is expected to grow moderately in 2009, despite the global downturn.  Officials expect growth of just over 2% next year, but Barclays Capital (ADR: BCS) analyst Yingxi Yu told Forbes that demand growth could be closer to 3.5%.

The SRB may increase stockpiles of copper by as much as 74% in the next two years, Scotia Capital Inc. predicted in October.

China Digs for Bargains Down Under

Of course, China’s recent drive for raw materials is only half the story.

China is already home to the world’s largest population; now it is on the fast track to passing Japan as the world’s second-largest economy. Access to resources will continue to be a priority in Beijing for decades to come, even long after the $586 billion stimulus plan is forgotten.

That’s why China isn’t just using the global financial crisis as an opportunity to stock up on raw materials, it’s also loading up on foreign companies and assets while it is flush with foreign reserves. And while prices are cheap.