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Comment by refurb | Hacker News Reader

Meanwhile, China’s ruling party is intent on attracting inbound foreign capital.

Somehow i think that may be a challenge.

There may be money to be made in China, but if you never know if you can get it out thats going to put a damper on things.

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Not only that, look what they did to the Chinese stocks, not to mention their idiotic covid zero lockdowns. No investor can trust the government to not fuck up everything.

Seems like fairly easily dealt with by foreign big capital kind of money. They can just buy some commodity with their chinese cash, export it as a trade good, then import it in the country of choice and sell it and deposit it in their account. Sure you may lose 20% of profits in the process but that's probably ok if you're getting access to an untapped market.

A even better method is to start a business in China and get permission to send money overseas to buy “supplies”.

I was talking to guy in California who got an order for $1M in chips from a Chinese company. He had done tons of business in China and even had a factory there. Sent the invoice ahead of time (no product shipped) and the guy in China went silent.

His theory was that they used the invoice to get approval to exchange to USD and send it to the US. They probably edited the invoice to change the bank account the payment was made to.

That worked years ago, but nothing stops the Chinese government from clamping down on it.

Sales doesn't go up suddenly just because you import extra to sell

It does, if as the gp stated you sold it for 20% less.

They do not need foreign capital per se. They need foreign business expertise and technology in areas where domestic ones are not sufficient at the moment. For pure capital they have more than enough in US debt, maybe even too much, since they try to allocate as much of it as possible (e.g. using the one belt initiative) without launching RMB exchange rate into space.

With the mounting up US sanctions, trade wars, and "friend-shoring", China will have less and less interest in western investments.

True, but foreign business expertise and technology uses goes hand in hand with foreign investment (otherwise, why bother?). So China isn't going to get the former, if they don't make the later easier.

Ease of capital flow is one reason why Singapore has done so well (among many reasons). You can turn Singapore dollars into whatever currency you want, in whatever quantities and move it out of the country with no barriers at all.

Plus the rule of law, which means the government is predictable in its decision making. Singapore isn't going to turn around and nationalize a bunch of foreign industries any time soon, because they realize the second they do, all that foreign capital is going to disappear very quickly.

>why bother?

For example because your production capacity in China will produce your stuff for cheap and you will be able to sell this stuff with a good markup? You will not be able to easily sell the production capacity and move the resulting capital outside of China as you would in the US or EU, but as long as it operates it will generate you profit.

That could work in low capital intensive industries, but I'm not sure the numbers would work out for high tech, high capital intensive industries where you need to invest billions that you may never be able to recover.

I'm not so sure about that. China has brought a lot of US debt https://www.ey.com/en_cn/china-overseas-investment-network/o...

I don’t see how China buying U.S. debt would lead to more inbound foreign capital into China. Can you elaborate on this?

China has run a persistent trade surplus with the US [1] so naturally it's accumulated a lot of USD, about $3T [2]. And there's only one place to keep that much money safely which is US Treasury i.e., lend it back to the US.

[1] https://www.census.gov/foreign-trade/balance/c5700.html

[2] https://tradingeconomics.com/china/foreign-exchange-reserves

Thats because they need to put their export earning somewhere and US govt debt is the safest place to put it.

Wouldn't that be Chinese capital investing in the US?

They bought US debt because they are confident the US will pay it off, it’s a ROI?

Not to attract capital…

No. They bought it because the excess capital produced by artificially low exchange rate used to stimulate domestic production and exports is too big to be parked anywhere else.

They didn't think it would lose money though, right?

With negative real interest rates they DO lose purchasing power and I think they thought about such risk. But making China a production powerhouse and technology transfer associated with it was a much more important goal.

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