Isn’t sliding down a hill fun?

Last year, FDI in China rose to $74.7, a marked increase from the $69.5 billion in 2006, so says a piece in Bloomberg today.

Some highlights of the article:

  1. Foreign and domestic firms will now be taxed at the same rate (25%). Before this year, foreign firms enjoyed a 15% tax rate; domestic firms endured approximately a 30% tax rate.
  2. The risk is that Vietnam will become more attractive that China: cheaper labor and lower taxes.
  3. Chinese average urban income is a whopping $2875 a year.

Tax and labor arbitrage stays healthy, very healthy indeed. A long time ago I said Vietnam may give China a run for its money. Vietnam better hurry up, though. Time’s a-ticking. And time is money.

And from the The Arizona Republic, of all places, we learn that America is for sale.

Last year, foreigners paid $294 billion for 615 American public companies, according to Standard & Poor’s Capital IQ research service. That’s up from 283 deals worth just under $59 billion in 2004.

This article is solidly in the conservative camp; after all, that so many are so interested in purchasing U.S. assets must mean that America is very healthy. Now that is an interesting twist.

If you want to have a handle on costs in China, from BigMacs to professorships, here’s a nice site.
When companies move elsewhere it usually means that costs are lower. This is a very simple observation, but it seems to elude many people. Those who do get it are of two stripes:

  1. Those who think the solution is to lower taxes here. “Taxes” to these people is a very, very nasty word. It’s a knee-jerk reaction. They can’t help themselves.
  2. Those who think the solution lies somewhere in our trade policy. “Taxes” to these people is not necessarily a nasty word, but they are trying to understand what is happening.

Unfortunately, the JGTRRA (Jobs and Growth Tax Relief Relief Act of 2003) did not save us. Look where we are: Selling off America, investing in China and other developing countries. Lowering capital gains again? Not going to work. Lowering other taxes to increase investment? Nope. Despite all we have done, the trade deficit grows. Our debt grows, private and public. One thing we are good at: Spending money.

The America consumer has been fleeced time and time again. But, like the village idiot, he returns if you promise him another candy bar.

What about insisting that currency manipulation is inherently an unfair trade practice? I think so. But what have our politicians done, Democrats and Republicans alike? Every now and then they make a noisey show and then are blissfully quiet.

Rest assured, our FDI investments in third world countries are pulling the strings. Profits. Profits…the name of the game.

And what has our pride and joy done, our great financial institutions?

Remember when they were touted as la creme de la creme, our savior? America was the financial capital of the world! Alas, they were caught selling a pig in a poke. Many pigs in that poke, as a matter of fact.

Paulson call it “Innovation,” very quaint of him, I think. “Let’s not over-regulate or insist on transparency,” our esteemed Secretary in effect said.

“Careful, boys. Let’s not get too hasty just because our banks are in trouble, just because they don’t trust each other.” Certainly our Secretary hit the nerve that makes the knee jump.

Government: Bad, bad….Regulations….bad, bad. Reminds me of that South Pacific ditty: “You’ve got to be taught….” Well, Americans have been condition to hate taxes, hate regulations…any regulations, any taxes. What can I say: It’s their thing.

Something is amiss and out of place when rats with wings can wear a human face. (Thank you, Roethke.)

It’s hard getting people to see past their noses–to at least ask the questions about trade and debt.

Tell you what, let’s keep adding jobs in government, health care, and services even while we lose jobs in manufacturing….and call it even. So what if we have nothing to trade.