Worse case scenario: At the end of the day it would seem China ends up with a huge amount of dollar bills (treasury notes) and excess capacity, and we end up with a lot of consumer goods and excess debt. To spend those dollars the Chinese would then turn to buying American productive capacity (farmland, R&D research, manufacturing capability, other American companies) while directing their excess capacity to new found internal demand. We are left in debt and without owning our productive capacity - a colony. Hopefully I'm missing something here so there is a happy ending.
No, that's what happens to major debtor nations, especially those that have no laws to prevent such -- many countries I believe still have plenty of laws to limit foreign ownership.
In our case, this has clearly been happening; just last night I was looking at the BEA's report "Operations of U.S. Affiliates of Foreign Companies" for 2002.
Some depressing figures. Depending on how you define foreign-owned, foreigners' FDI assets in the non-financial area were somewhere between $4.5 and $5.5 trillion. For the financial area, there was another $2.2 trillion of assets held. 5.9 million Americans worked in 2002 for these companies; that's down from a high of 6.5 million in 2000. (I also was reading Japan's FDI report which includes more recent data, and much of Japan's reduction of U.S. employees is to hire people in China.)
Along with $1.7 trillion in government debt, that's a lot of ownership in my opinion.
For comparison, the capitalization of all U.S. companies in all of the major world markets is $33.6 trillion. U.S. companies on the New York Stock Exchange are at about $11.7 trillion in capitalization; NASDAQ and Tokyo each are at $3.2 billion:
| Market Capitalization (trillions) | 10/31/2004 | 10/31/2003 | 12/31/2003 | ||
| Domestic Listed Companies (excluding closed-end funds - official WFE figures) | $33.6 | $28.6 | $31.3 | ||
| of which: | NYSE | $11.7 | $10.8 | $11.3 | |
| Nasdaq | $3.2 | $2.9 | $2.8 | ||
| Tokyo Stock Exchange | $3.2 | $2.3 | $3.0 | ||
| London Stock Exchange | $2.6 | $2.2 | $2.4 | ||
| Euronext | $2.2 | $1.9 | $2.1 | ||
| Deutsche Borse | $1.0 | $0.9 | $1.0 | ||
| AMEX | $0.09 | $0.08 | $0.08 | ||
You might also take a look at the Federal Reserve's publications on assets owned by U.S. households to get other numbers to compare the foreign FDI figures.