What have you always wondered about the economy? Tell Us

China’s spreading the wealth around

Scott Tong Sep 28, 2007
HTML EMBED:
COPY

China’s spreading the wealth around

Scott Tong Sep 28, 2007
HTML EMBED:
COPY

TEXT OF INTERVIEW

Lisa Napoli: China’s got lots and lots and lots of money sitting around — a trillion dollars worth of foreign reserves. Tomorrow, it’s going to unveil a new organization. Its job is to diversify where that money gets invested.

I talked to Scott Tong in Shanghai this morning about where they keep it now.

Scott Tong: In a pretty boring place. In U.S. treasuries and bonds, places where the returns are predictable and small, right. So Chinese leaders decided, they made an investment decision kind of like you and I would make — let’s diversify, let’s see if we can get some better return.

And so China tomorrow is going to unveil this China Investment Corporation, and we think they’re gonna take about $200 billion of their foreign reserves and start spreading it out somewhere in the world. Which means China’s newest export is capital.

Napoli: Where is this money gonna go? How are they gonna start spreading it out around the world?

Tong: Well, there’s a whole lot of rumors. Some people are saying China’s gonna throw its money at a mining company in Australia, or the Hong Kong Stock Exchange, or oil companies an Angola. Now, the smart money in China is betting that whatever China does, it’s gonna do very slow and very gradual, because that’s how China makes economic policy.

Napoli: So Scott, basically what you’re saying is what China’s about to do, sounds like they’re acting more like Dubai in that they’re gonna start buying, investing around the world.

Tong: That’s right. Dubai, and other countries like Norway and Singapore, they have these kinds of funds. And they invest, and they spread it out pretty quietly around the world — they don’t want to stoke up a lot of opposition. For instance, when the Chinese National Oil Company, CNOOC, wanted to buy Unocal a couple years ago in the United States, we all remember the political dust-up. Well, these funds know that they can be politically sensitive. So they’re gonna go around and presumably buy small stakes in wherever they put their money.

Napoli: That’s our Scott Tong in Shanghai.

News and information you need, from a source you trust.

In a world where it’s easier to find disinformation than real information, trustworthy journalism is critical to our democracy and our everyday lives. And you rely on Marketplace to be that objective, credible source, each and every day.

This vital work isn’t possible without you. Marketplace is sustained by our community of Investors—listeners, readers, and donors like you who believe that a free press is essential – and worth supporting.

Stand up for independent news—become a Marketplace Investor today with a donation in any amount.