A New Year – A New DirectionThe Paltry PurseWhy China buys United States Treasury bonds and not United States companies has befuddled deal‐ makers ever since China crossed the trillion dollar mark in foreign exchange reserves. One would expect that the world’s largest economy and the world’s second largest economy would each be major investors in the other. In 2010, however, when China’s foreign investment abroad jumped by 20%, the United States ranked 7th as a destination for China’s investment dollars. Admittedly the top three countries, Hong Kong, the British Virgin Islands and the Cayman Islands, may serve as a half‐way point for outbound funds and so disguise the ultimate destination of the investment; but since none of these countries has a tax treaty with the United States, it is unlikely that they serve as pass‐through corporate vehicles for investment in America. And while the United States might make excuses for coming behind these three former or existing British colonies, the United States also ranked in 2010 behind Luxembourg, Australia, and Sweden, and was only slightly ahead of Canada.1Times are changing, however. There has been a rapid increase in the amount and rate of investment by Chinese companies in the… Read full this story
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