Through its massive sovereign wealth fund, built up primarily through consistently holding massive trade surpluses with the U.S., China is increasingly stepping up its investment activity around the world, especially in the U.S., according to The Los Angeles Times.
   
“Made in China now has a fast-growing sibling: Bought by China,” the paper reports. 

One of the areas in which China is investing heavily is U.S. real estate, according to the report.  Attracted by bargain prices caused by the collapse of he market, the Chinese have invested in some of the county’s largest real-estate related funds, including Goldman Sachs and Oaktree Capital.

But, possibly for fear of creating a major backlash in America, China’s investments have been relatively small.  With a sovereign wealth fund estimated to be valued at $2.5 trillion, the Chinese have been extraordinarily modest in their investment strategy.

According to The Los Angeles Times, China’s largest U.S. investment last year was a $1.6 billion transaction that allowed it to acquire a 15.8 percent stake in a power company.

Outside experts say that the amount of Chinese investment in U.S. assets, excluding bonds, was anywhere in the range of $3.9 to $6.4 billion “officially,” but some assume that China may have been indirectly investing in U.S. companies in the past few years through the billions of dollars Beijing has farmed out to hedge funds.

Last month, for the first time in its history, China Investment Corp., a sovereign wealth fund responsible for managing part of China’s foreign currency holding, revealed a glimpse into its investment strategy in the U.S. in a Securities and Exchange Commission filing.

The report showed that CIC had equity stakes totaling $9.63 billion in over 60 American companies at the end of 2009.  
Although most of the stakes are small, CIC is investing money in some of America’s most iconic companies.

The report shows that China holds small stakes in insurance giant American International Group, Apple, News Corp., Johnson & Johnson, Coca Cola, Motorola and Visa.

China has been able to accumulate such a massive foreign wealth fund through illegal trade practices that have allowed it to become the world’s top exporter and consistently hold massive trade surpluses.  Last year, the U.S.’ $227 billion trade deficit with China accounted for nearly two-thirds of the nation’s total trade deficit.

Print PDF