by Bruce Webb
There has been a scattering of stories about how China has slowed or stopped buying U.S. Treasuries. This story offers a possible explanation
Beijing is using its accumulation of billions of American dollars to step up its investments around the globe. In the last year, Chinese acquisitions in the U.S. have ranged from a relatively obscure theater in Branson, Mo., to stakes in such famous brands as Coca-Cola and Johnson & Johnson.
China’s huge stockpile of dollars stems in part from Americans’ enormous purchases of relatively inexpensive Chinese manufactured goods and the significantly smaller volume of U.S. exports to the Asian country.
By recycling much of its dollar trove over the years back to the United States with the purchase of U.S. government debt, China has in effect helped Washington finance its deficits.
Now, Beijing is branching out. The country’s direct investments overseas rose 6.5% in 2009 to $43.3 billion — despite a global slump in such investments — and could jump to $60 billion this year, Chinese state media reported last week.
Formal estimates of Chinese investments in the U.S. last year, excluding bond purchases, range from $3.9 billion — a figure put out by New York research firm Dealogic — to $6.4 billion, a number that comes from Derek Scissors, a Heritage Foundation research fellow who tracks China’s global transactions
I’ll let the econoBears explain the significance here, my flip summary would be “Why rent when you can own”. It certainly doesn’t indicate that the Chinese are expecting some terrific crash in the medium term.