China Moves Funds Out of the U.S. Markets

By Sasha Cekerevac for Investment Contrarians | May 29, 2012

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Recently, news broke that the Chinese Investment Corporation has announced that it will be moving some of its invested funds out of the U.S. and into emerging markets. This is an interesting move by China regarding its viewpoint of the future for the U.S. economy. The U.S. economy has obviously encountered significant setbacks over the last few years, but it appears this is only the beginning. Once nations like China decide that the future is less bright when looking at the U.S. economy compared to other nations, that’s when we have real issues.

The sustainability of the U.S. economy is built on foreign investments; fresh money coming into the nation continuing its growth path. Once we lose the interest of other nations in investing in the U.S. economy, we lose our edge. The U.S. economy has become the largest in the world out because of our ability to attract capital and people to come to this country to develop new technologies and innovations. This is yet another sign by a major country—China—that foreign investors are losing faith in the ability of the U.S. economy to deliver strong growth over the long term. This is a not a positive sign for our children who will inherit a U.S. economy that appears to be slipping back when compared to the rest of the world.

The China Investment Corporation stated that part of the reason was increased scrutiny from regulators, as many are worried that, as the organization is backed by the Chinese government. While everyone should be aware of keeping our best companies within the U.S. economy, shutting the door to foreign investment is not the answer. Don’t forget; the government in China owns trillions of our bonds. The U.S. economy needs continued foreign inflow of funds, not just from China, but also the rest of the world. We need to change our ways and get back to a time when the U.S. economy was a pillar in the world, a beacon of light to which other nations looked up to and tried to emulate.

The sovereign wealth fund from China is looking at emerging markets, because it believes those countries will grow much faster and have a better long-term potential for profits than the U.S. economy. The U.S. economy, while still suffering from a slow recovery, would benefit from an increased flow of dollars into the nation. Closing the door to foreign investments, whether it is from China or any other nation, is not the best interest for the long-term growth of the U.S. economy.

Tags: China, U.S. economy