U.S. meets on China’s investments

Ashley Milne-Tyte Feb 7, 2008


Doug Krizner: Many of the big Wall Street banks are now owned in part by sovereign wealth funds from Asia and the Mid East. It’s all because the credit crunch left the banks in desperate need of financing. Morgan Stanley sold 5 percent to China’s sovereign wealth fund.

Not everyone thinks that’s a good idea. Today in Washington, there’s a hearing on what China’s investment means for the U.S. Ashley Milne-Tyte reports.

Ashley Milne-Tyte: University of California business professor Peter Navarro is testifying at today’s hearing. He sees China’s sovereign wealth fund as an economic threat, particularly if it takes a controlling stake in a U.S. company.

Peter Navarro: Rather than produce in the U.S., they might offshore more jobs to China. They can influence where research and development is conducted. Rather than do it in Silicon Valley, they might do it in Dalian or Shanghai.

Funds can’t buy more than 9.9 percent of a U.S. company without sparking a security review by the Treasury Department. Still, Navarro isn’t convinced the Treasury has the political will to block a big deal.

But Stanford economist Ronald McKinnon says China’s fund is nothing to fear.

Ronald McKinnon: I don’t think there’s some diabolical puppeteer behind this deciding to pick off U.S. industries.

He says China’s just fed up of making paltry returns on U.S. Treasury bonds. And snapping up American assets through its sovereign wealth fund is a way to make more money on overseas investments.

I’m Ashley Milne-Tyte for Marketplace.

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