Last month, The Heritage Foundation, a conservative American think-tank, published its annual map (above) of China’s direct foreign investment (FDI) by destination, covering investments of at least $100 million made in 2011. The data comes from its China Global Investment Tracker, which goes back five years.
The dominant aspect of Chinese investment in 2010 was a rush to South America, led by (but not limited to) Brazil. Other features include a jump in new, large construction contracts and fewer failed transactions. Chinese investment in the U.S. in 2010 was steady at a bit over $6 billion but far more diversified than in 2009.
No great surprises there, though the map does highlight the ubiquity of Chinese FDI last year.
In a new blog post, Derek Scissors, Research Fellow in Asia Economic Policy in the Asian Studies Center at The Heritage Foundation, lays out the Foundation’s policy prescriptions. These include clarifying which areas of America’s natural resources and manufacturing are open to Chinese FDI and “sharpening the mandate” of the Committee on Foreign Investment in the United States (Cfius), an inter-agency committee comprised of representatives of 16 U.S. government departments and agencies that reviews the national security implications of foreign investments in the U.S.
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China’s Innovative Beggar-thy-neighbor Strategy!
Insanity: doing the same thing over and over again and expecting different results. – Albert Einstein
As long as the United States continues to allow China to manipulate the U.S. Dollar and therefore manipulate our trade with ALL our trading partners:
– our balance of trade with ALL our trading partners will be worse than it would otherwise be.
– free trade agreements will work to our disadvantage and we should halt entering into new ones.
Mark Twain is credited with an early use of the cliché “more than one way to skin a cat” in A Connecticut Yankee in King Arthur’s Court, as follows: “she was wise, subtle, and knew more than one way to skin a cat, that is, more than one way to get what she wanted”. Thefreedictionary.com defines beggar-thy-neighbor as: an international trade policy of competitive devaluations and increased protective barriers that one country institutes to gain at the expense of its trading partners. Under the guise of fostering ‘indigenous innovation’, the Chinese government has creatively used a non-conventional, subtle version of beggar-thy-neighbor. Its version doesn’t entail the competitive devaluation of its own currency, which would enhance China’s exports and inhibits its trading partners’ exports to China. China’s version perpetrates an over-valuation of the currencies of one or more of its trading partners. This negatively affects all the trade of the pegged trading partner(s), not just trade with China. During the recent period China pegged its currency to the U.S. Dollar, its version of beggar-thy-neighbor was 8 times as damaging to the U.S. economy as what the media refers to as “China keeping it currency undervalued”.
In November 2003, Warren Buffett in his Fortune, Squanderville versus Thriftville article recommended that America adopt a balanced trade model. The fact that advice advocating balance and sustainability, from a sage the caliber of Warren Buffett, could be virtually ignored for over seven years is unfathomable. Until action is taken on Buffett’s or a similar balanced trade model, America will continue to squander time, treasure and talent in pursuit of an illusionary recovery.
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