We know money is leaving China but where is it going? The Chinese government is burning through $billions of foreign reserves defending the yuan in what many think is a losing game possibly against predatory US hedge funds in a game similar to George Soros attacking the UK Pound in previous times. But what else?
Jim Rickards writes: China lost almost $1 trillion of hard currency reserves in the past year. A lot of that money is being used to buy U.S. companies. We’ve all heard that the money coming out of China has been used to buy up high-end condos from Seattle to Sydney, from Melbourne to Miami. That’s true. But a lot of the money is being used to target U.S. companies that own critical infrastructure in defense, telecommunications, finance and other sensitive sectors. Right now, China is trying to buy the Chicago Stock Exchange. The Chicago Stock Exchange is a small player compared with the New York Stock Exchange, but it’s plugged into the same order entry systems and clearing networks as the NYSE, Nasdaq and the “black box” exchanges inside Goldman Sachs and other big brokers. China could use that access to plant attack viruses or download sensitive corporate information. There is an agency called the Committee on Foreign Investment in the United States (CFIUS) that is supposed to approve sensitive transactions. In fact, most transactions get approved in the end with only minor modifications.
Given the recent volume of deals, it would appear that the Chinese government is supportive of the foreign-buying spree.