China Moves Funds Out of the U.S.
By Sasha Cekerevac for Investment Contrarians |
Recent news 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 is a decision that sends an important signal about investor sentiment. This is an interesting move by China regarding its view for the future of the U.S. economy. The U.S. economy has obviously encountered significant setbacks over the last few years, but these are only the beginning of our problems if investor sentiment such as this takes hold. 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’ll have serious issues.
The sustainability of the U.S. economy is built on positive investor sentiment built with foreign investments, fresh money coming into the nation and continuing its growth path. Once we lose foreign investor sentiment to other nations, the U.S. economy will lose its edge. Attracting capital and people to join the U.S. economy in creating wealth is the foundation of American success. The U.S. economy has become the largest in the world because foreign capital and people have developed new technologies and innovations. Once investor sentiment shifts, the country that gets this new attention will also get the result, which is a much stronger economy.
The China Investment Corporation stated that part of the reason was increased scrutiny from regulators, as many are worried that 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.
The sovereign wealth fund is looking at many other emerging nations that will benefit from the increased dollars from China. The U.S. economy, mired in its current financial difficulties, obviously cannot afford to be cut off from the money that’s been coming from China. This money is what creates greater funding for new technological innovation and, ultimately, more jobs. A shift in investor sentiment away from the U.S. economy is not in America’s best interest over the long term. These structural roadblocks need to be removed, and the U.S. economy needs to become the main place in the world for capital to flow into. Shifts in investor sentiment are serious, as once lost, it’s extremely difficult to get back.