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China is a gigantic investor in the USA. Whenever you hear the term "trade deficit" that the US has to China, there is an identical amount in "investment surpl

China is a gigantic investor in the USA. Whenever you hear the term "trade deficit" that the US has to China, there is an identical amount in "investment surplus" that the US gets from China. That investment is everywhere - in our stock market, in our government debt, in our real estate and in our Ohio Windshield plants. Every time you buy an iPhone, you're handing China hundreds of dollars which they then invest in America. We very literally gave them a Windshield plant in exchange for consumer goods. https://www.forbes.com/sites/timworstall/2016/05/16/that-china-trade-deficit-comes-back-to-the-us-110-billion-into-real-estate-alone/#76342d974653 https://www.forbes.com/sites/timworstall/2016/05/16/that-chi...

nickpsecurity 9y ago
The author of your link keeps repeating that things will balance simply because they will balance. That sounds like "what I say is true because I say it is true." Is there proof of this beyond the author's mere assertions? Also, the author says we pay for stuff that turns into capital for them. They use that capital to create more businesses or own more stuff here. That doesn't sound like it's going to balance for the U.S.. It sounds more like they'll progressively have more ownership, market share, and revenues over time.
- rukittenme 9y ago
  I suppose you could look at it in the classical economic sense. I give you $1 because I value it less than a cheeseburger. You give me a cheeseburger because you value it less than a $1. I don't think that means things even out between US and China. But I do think it means things even out overall. We may "lose" with China and "win" with others. But ultimately, as long as people are spending their own money (as they want to spend it) I can't see how a trade deficit/surplus will ever affect them.
  - Spooky23 9y ago
    The US model right now is is exporting cash and hard assets in exchange for mostly consumable goods. It's a pretty obvious bad idea. It's ok in the sense that it isn't a moral hazard. But it's bad in that we're exporting our wealth and hollowing out the country.
    - MR4D 9y ago
      I question the comment about not being a moral hazard. It's almost like a free-rider problem, but shifted in time instead of person. Not saying you're wrong, just questioning it's assumption in economics.
      - Spooky23 9y ago
        It's a good point. Economics as practiced today is very "transactional" vs looking at the long term. It's pretty obvious that we've morphed into a poorer country over the last 30 years. We've also shifted our thinking about prosperity from employment to GDP. Also there's no concept of nationalism in modern economics, and many advocates for the current way of doing stuff inject revisionist social agendas to the mix. (I.e. Why should Westerners be privileged?)
  - nickpsecurity 9y ago
    " But ultimately, as long as people are spending their own money (as they want to spend it) I can't see how a trade deficit/surplus will ever affect them." Long-term, risk avoidance is a weakness in people. They'd be spending it thinking of one result with another, worse one on the way. That's a way it might happen.
- icantdrive55 9y ago
  He uses realestate as his argument, and that's about it. And why not? The rich Chinese know our system is less corrupt, more stable than their corrupt/fickle whatever. They know owning realestate in the United States is a no brainer. Why not shoot off a few emails and procure homes, and commercial buildings? You don't even need to be a citizen. I can think of any country that makes buying realestate so easy. "You can't get a driver's licence, but you can buy an apartment complex.". I don't get it.
- tuna-piano 9y ago
  Yes, read into the balance of payments: http://www.investopedia.com/articles/03/060403.asp#axzz1rYFTbCfM http://www.investopedia.com/articles/03/060403.asp#axzz1rYFT... It's basically: Stuff+Investments sent = Stuff+Investments received Think about it this way: China sends the US an iPhone, and the US sends dollars (paper / numbers on a screen) in return. China put a lot of work into the iPhones... what did they get? They got the opportunity to buy stuff in America with dollars! What do they want to buy? They could buy stuff, like airplanes and software, or they can buy factories. And yes, when they buy American investment products, they will (or hope to) receive more back in the future. When you buy a productive asset, or save money, you expect to receive more back in the future. So when you sell that productive asset, you give up that future benefit for a smaller benefit today.
  - mistermann 9y ago
    > China sends the US an iPhone, and the US sends dollars (paper / numbers on a screen) in return. China put a lot of work into the iPhones... what did they get? They got the opportunity to buy stuff in America with dollars! This makes it sound like every dollar from the US finds it's way "back home". China has been doing a lot of investing in other places like Africa, and China. Where does that money come from? Not Africa and China I suspect.
    - chii 9y ago
      ultimately, only place you can ultimately spend american dollars is in america. Some spent indirectly do find its way back to america, some stay out and circulate for a very long time, but imagine a scenario where america collapses (suddenly for an unknown reason). Will countries that used to take american dollars as a form of payment continue to accept it? I'd say no. Therefore, money spent by china in africa in the form of american dollars will ulimately be re-used to purchase american goods.
      - firethief 9y ago
        That would be more true if currencies could not be exchanged.
greglindahl 9y ago
Every time you buy an iPhone, a tiny amount of that money stays in China. Here are then numbers for 2010: http://pcic.merage.uci.edu/papers/2011/value_ipad_iphone.pdf http://pcic.merage.uci.edu/papers/2011/value_ipad_iphone.pdf See Figure 1.
qeternity 9y ago
> China is a gigantic investor in the USA. Whenever you hear the term "trade deficit" that the US has to China, there is an identical amount in "investment surplus" that the US gets from China. This is a bit of an oversimplification of how balance of payments resolves itself. For instance, their central bank (PBOC) has the largest FX reserves in the world. When we buy things from China, the seller can either keep USD to invest/purchase something in the US, or can buy CNY. To keep the CNY from appreciating too much and making Chinese exports uncompetitive, the PBOC sells CNY and buys those USD. They in turn use some of the proceeds to purchase US Treasuries. However they do this not because they want to invest in the US, but because they want to hedge inflation. So yes, your comment is true-ish, and global trade is an amazing thing, but it's a bit misleading to say every dollar sent abroad returns to "invest in America" in the typical sense that most people/HN commenters think of investing.

nickpsecurity 9y ago

The author of your link keeps repeating that things will balance simply because they will balance. That sounds like "what I say is true because I say it is true." Is there proof of this beyond the author's mere assertions? Also, the author says we pay for stuff that turns into capital for them. They use that capital to create more businesses or own more stuff here. That doesn't sound like it's going to balance for the U.S.. It sounds more like they'll progressively have more ownership, market share, and revenues over time.

rukittenme 9y ago
I suppose you could look at it in the classical economic sense. I give you $1 because I value it less than a cheeseburger. You give me a cheeseburger because you value it less than a $1. I don't think that means things even out between US and China. But I do think it means things even out overall. We may "lose" with China and "win" with others. But ultimately, as long as people are spending their own money (as they want to spend it) I can't see how a trade deficit/surplus will ever affect them.
- Spooky23 9y ago
  The US model right now is is exporting cash and hard assets in exchange for mostly consumable goods. It's a pretty obvious bad idea. It's ok in the sense that it isn't a moral hazard. But it's bad in that we're exporting our wealth and hollowing out the country.
  - MR4D 9y ago
    I question the comment about not being a moral hazard. It's almost like a free-rider problem, but shifted in time instead of person. Not saying you're wrong, just questioning it's assumption in economics.
    - Spooky23 9y ago
      It's a good point. Economics as practiced today is very "transactional" vs looking at the long term. It's pretty obvious that we've morphed into a poorer country over the last 30 years. We've also shifted our thinking about prosperity from employment to GDP. Also there's no concept of nationalism in modern economics, and many advocates for the current way of doing stuff inject revisionist social agendas to the mix. (I.e. Why should Westerners be privileged?)
- nickpsecurity 9y ago
  " But ultimately, as long as people are spending their own money (as they want to spend it) I can't see how a trade deficit/surplus will ever affect them." Long-term, risk avoidance is a weakness in people. They'd be spending it thinking of one result with another, worse one on the way. That's a way it might happen.
icantdrive55 9y ago
He uses realestate as his argument, and that's about it. And why not? The rich Chinese know our system is less corrupt, more stable than their corrupt/fickle whatever. They know owning realestate in the United States is a no brainer. Why not shoot off a few emails and procure homes, and commercial buildings? You don't even need to be a citizen. I can think of any country that makes buying realestate so easy. "You can't get a driver's licence, but you can buy an apartment complex.". I don't get it.
tuna-piano 9y ago
Yes, read into the balance of payments: http://www.investopedia.com/articles/03/060403.asp#axzz1rYFTbCfM http://www.investopedia.com/articles/03/060403.asp#axzz1rYFT... It's basically: Stuff+Investments sent = Stuff+Investments received Think about it this way: China sends the US an iPhone, and the US sends dollars (paper / numbers on a screen) in return. China put a lot of work into the iPhones... what did they get? They got the opportunity to buy stuff in America with dollars! What do they want to buy? They could buy stuff, like airplanes and software, or they can buy factories. And yes, when they buy American investment products, they will (or hope to) receive more back in the future. When you buy a productive asset, or save money, you expect to receive more back in the future. So when you sell that productive asset, you give up that future benefit for a smaller benefit today.
- mistermann 9y ago
  > China sends the US an iPhone, and the US sends dollars (paper / numbers on a screen) in return. China put a lot of work into the iPhones... what did they get? They got the opportunity to buy stuff in America with dollars! This makes it sound like every dollar from the US finds it's way "back home". China has been doing a lot of investing in other places like Africa, and China. Where does that money come from? Not Africa and China I suspect.
  - chii 9y ago
    ultimately, only place you can ultimately spend american dollars is in america. Some spent indirectly do find its way back to america, some stay out and circulate for a very long time, but imagine a scenario where america collapses (suddenly for an unknown reason). Will countries that used to take american dollars as a form of payment continue to accept it? I'd say no. Therefore, money spent by china in africa in the form of american dollars will ulimately be re-used to purchase american goods.
    - firethief 9y ago
      That would be more true if currencies could not be exchanged.

greglindahl 9y ago

Every time you buy an iPhone, a tiny amount of that money stays in China. Here are then numbers for 2010: http://pcic.merage.uci.edu/papers/2011/value_ipad_iphone.pdf http://pcic.merage.uci.edu/papers/2011/value_ipad_iphone.pdf See Figure 1.

qeternity 9y ago

> China is a gigantic investor in the USA. Whenever you hear the term "trade deficit" that the US has to China, there is an identical amount in "investment surplus" that the US gets from China. This is a bit of an oversimplification of how balance of payments resolves itself. For instance, their central bank (PBOC) has the largest FX reserves in the world. When we buy things from China, the seller can either keep USD to invest/purchase something in the US, or can buy CNY. To keep the CNY from appreciating too much and making Chinese exports uncompetitive, the PBOC sells CNY and buys those USD. They in turn use some of the proceeds to purchase US Treasuries. However they do this not because they want to invest in the US, but because they want to hedge inflation. So yes, your comment is true-ish, and global trade is an amazing thing, but it's a bit misleading to say every dollar sent abroad returns to "invest in America" in the typical sense that most people/HN commenters think of investing.