China has been planning a proposal to convert over $1tn of Chinese-owned land in the US into ‘development zones’ that could see the establishment of Chinese business and citizens in North America. The proposal would mean China would own American businesses, infrastructure and valuable land. In exchange for the investment the US government would guarantee China against any loss.
WND has reported that under the plan the Obama administration would back a financial guarantee as an incentive for China to “convert US debt into Chinese direct equity investment.” This entails China being granted ownership over a number of successful US corporations, profitable infrastructure projects and real estate. However, the main motivation behind the proposal is to ensure China takes up lending to the US on a nearly zero-interest basis, once more.
Yu Qiao, a professor of economics in the School of Public Policy and Management at Tsighua University in Beijing, told WND that a plan for the US to back foreign investment had been in the works since as early as 2009.
China currently owns over $1.17trn in US Treasury securities and is said to be concerned about spiralling US debt levels. Since the onset of the financial crisis China had already reduced its holding of short-term US Treasury bills from $573.7bn in mid-2008 to $5.96bn by March 2011.
“The basic idea is to turn Asian savings, China’s in particular, into real business interests rather than let them be used to support US over-consumption,” Yu Qiao wrote in WND. “While fixed-income securities are vulnerable to any fall in the value of the dollar, equity claims on sound corporations and infrastructure projects are at less risk from a currency default.
“But Asians do not want to bear the risk of this investment because of market turbulence and lack of knowledge of cultural, legal and regulatory issues in US businesses. However if a guarantee scheme were created, Asian savers could be willing to invest directly in capital-hungry US industries.”