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Who China is Rooting for in Tonight's Cavs - Magic Game

Posted By Derek Scissors, Ph.D. On May 28, 2009 @ 4:49 pm In International | Comments Disabled

A group of individual investors with strong ties to Chinese companies wants to buy into the Cleveland Cavaliers [1]. This isn’t the first [2] or the largest [3]Chinese investment in the U.S. but it could be an important signal.

Up till now, Chinese investment here has been dominated by large state-owned companies interested in finance and technology. The offer for part of the Cavs is quite different and may herald a new, much broader Chinese spending pattern. There’s certainly enough money on the other side of the Pacific – the PRC’s government holds upward of $2 trillion in foreign currency [4] and the number of Chinese millionaires has skyrocketed.

Some of this money is going to be welcomed, for example if it helps Cleveland afford to keep Lebron James. But other acquisitions may spark worry that China is taking control of important American assets, as was the concern with Japanese investment in the 1980’s.

The basic rule of thumb in these cases is not to worry: foreign investors face a disadvantage in location, language, and understanding laws. Domestic investors get the best deals and the best terms. One serious objection to Chinese behavior, though, is that it isn’t transparent – the Chinese are generally not forthcoming about how they are spending.

For that reason, the Heritage Foundation tracks large Chinese investments around the world [5] – where, what, and how much. As Chinese money inevitably plays a larger role here, discussion of the issue must be based on actual facts about Chinese behavior.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/05/28/who-china-is-rooting-for-in-tonights-cavs-magic-game/

URLs in this post:

[1] wants to buy into the Cleveland Cavaliers: http://www.nytimes.com/2009/05/26/sports/basketball/26nba.html

[2] the first: http://www.infoworld.com/t/hardware/chinas-lenovo-buy-ibms-pc-business-293

[3] the largest : http://www.npr.org/templates/story/story.php?storyId=17416031

[4] upward of $2 trillion in foreign currency: http://apnews.myway.com/article/20090411/D97G8G300.html

[5] the Heritage Foundation tracks large Chinese investments around the world: http://www.heritage.org/Research/AsiaandthePacific/wp052609a.cfm

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