In his State of the Commonwealth speech on January 11, Virginia governor Glenn Youngkin stated:
In addition, Virginians – not the CCP [Chinese Communist Party] – should own the rich and vibrant agricultural lands God has blessed us with.
That is why I am asking the General Assembly to send me a bill to prohibit dangerous foreign entities tied to the CCP from purchasing Virginia farmland.
The stakes are too high and the consequences are too great.
Friends, that is just common sense.
I hope throughout our time here, that as we reach moments of impasse… whether on who should own Virginia farmland, how to protect the privacy of our children online, or whether Virginia law should be written in Virginia or California… we will find the courage and the confidence to choose commonsense.
His “Virginians” point in the first sentence is just an empty rhetorical flourish; he has no intention of prohibiting people from Maryland or Georgia or California from owning farmland in Virginia. As he makes clear, he wants to ban “entities tied to the CCP” from purchasing Virginia farmland.
Why? What are the stakes? What are the potential consequences? Youngkin doesn’t say; he says that it’s common sense.
But, as Charley Hooper and I say in our book, Making Great Decisions in Business and Life, common sense “is not all that common.” I think this is an instance.
What is he afraid that entities tied to the CCP would do if they own farmland? Would they take it out of production? That would hurt consumers, but it would also hurt the owners of the suddenly unproductive land. Would they make the farmland even more productive? That would help consumers. It would also hurt competing farmers, but that shouldn’t be a concern of someone who, at least occasionally, makes noises in favor of free markets.
Land, moreover, is going nowhere, literally. So whatever entities tied to the CCP might do, the land is an incredibly good hostage that gives the U.S. government leverage in dealing with the CCP. I’m not advocating that the U.S. government use that leverage. My point is simply that politicians who are that negative on CCP influence should realize that they have that leverage.
The picture above is of Virginia farmland.
READER COMMENTS
Jon Murphy
Jan 18 2023 at 9:52am
Even if one supports the fears of Youngkin, any legislation is likely to have unintended consequences. For example, a friend of mine in TX was telling me of proposed legislation that would ban Chinese ownership of any Texas real estate. The legislation, supposedly designed to prevent CCP from owning assets within American borders, was actually written to prevent anyone of Chinese citizenship from owning land. So my friend, a Chinese national who is here legally and the most anti-Communist person you will ever meet, could be forbidden from buying a house and realizing the American Dream.
Knut P. Heen
Jan 18 2023 at 10:41am
The “unintended” consequences are often intended, but not marketed as such. Banning groups from owning property is great for the investor who gets the property at a discount due to less competition. If only I could own property, it would be free. It would also be obvious to everyone that it is confiscation.
Jon Murphy
Jan 18 2023 at 10:57am
Very true. It’s rare that they say the quiet part out loud.
With Youngkin, I’d be willing to bet that he would oppose legislation with the effects of excluding all Chinese citizens out of the market.
Marilyn Griffin
Jan 19 2023 at 9:41pm
Are we all assuming that this article differentiates between the nation of China/its government/its affiliates and American citizens of Chinese descent? American citizens have a right to live and to own property anywhere in the USA. The other is a different kettle of fish in all ways, especially being a nation bent on world dominion in every way it can attain and certainly no friend of the USA.
Jon Murphy
Jan 19 2023 at 10:02pm
See my comment below about vague fear mongering
Fazal Majid
Jan 18 2023 at 12:05pm
Here’s an example of an even more despicable regime using California’s absurd system of senior and junior water rights against it:
https://www.theguardian.com/us-news/2019/mar/25/california-water-drought-scarce-saudi-arabia
Scott Sumner
Jan 18 2023 at 2:17pm
Great example of the insanity of our water pricing system. We massively subsidize cheap water use to benefit Saudi Arabia, while our cities are building expensive desalination plants.
Warren Platts
Jan 18 2023 at 2:23pm
There can be valid national security reasons to limit foreign investment in real estate. E.g., during the Covid panic, there was a reduction in the pork supply, yet Chinese-owned Smithfield Foods kept exports going to China unabated.
Similarly, a former PLA general secretly bought up 200 square miles of ranchland in Texas near our main Air Force training base. He claimed it was for a wind farm, but it’s in one of the worse areas of Texas if you want to make money in the wind business. That’s fishy.
Note that Virginia is also loaded with military installations.
Texas Lawmakers Say No to Chinese Billionaire’s ‘Wind Farm’ Near Air Force Base – Clever Journeys
David Henderson
Jan 18 2023 at 2:35pm
You write:
In other words, a reason not to allow foreign ownership is so that it’s easier to crack down on free trade. There are two problems with this: (1) free trade is good, and (2) if Smithfield Foods had been U.S.-owned, it still would likely have exported its product.
Jon Murphy
Jan 18 2023 at 3:33pm
On top of David’s point, the reduction in pork supply was due to US government actions, not Chinese government actions.
Jim Glass
Jan 18 2023 at 6:02pm
The PLA is notoriously corrupt (built on the Soviet/Russian model, you know). And rich Chinese are sending more money out of their country for “safekeeping” than are the rich of any other country (with the Russians not far behind). Reasons obvious, ask Jack Ma. The CCP is cracking down hard to stop it, but face the complication that the richest sending out the most are members of the CCP, like retired PLA generals. And, of course, the #1 destination country for wealth squirreled out of China, Russia and other corrupt states, is the USA.
If this was the general’s motivation for buying a wind farm, he had good reason to overpay, and he’s a small-timer. In New York City and London there are “billionaires’ rows” full of mega-million dollar apartments sitting empty…
… owned by Chinese, Russians, Arabs, members of various dictatorial regimes, etc. Here are more details about Chinese Money Laundering and Global Real Estate in particular.
Foreigners overpaying Americans for US assets is hardly a “national security threat”. (For the US — for the Chinese, maybe.)
I saw all this back in the late 1980s when the Japanese were buying up everything in sight. In 1989 they bought Rockefeller Center and there was screaming and hollering in the press everywhere! America was being sold off whole! Six years later they defaulted on the mortgage and all was back home again. We rube Americans took them slick Nippons to the outhouse.
Never look a gift big pile of cash in the mouth. As the old song goes, “paranoia will destroy ya’.”
Jon Murphy
Jan 18 2023 at 6:14pm
Your bring up an excellent and important point, Jim. The implicit assumption is that the CCP are directing these activities. But it is more likely that these individuals are using real estate in a foreign country as a shield from the CCP. Restricting such purchases, consequently, would lead to support of CCP goals and more control over their citizens, not less. And still have the negative effect of harming Americans.
Warren Platts
Jan 19 2023 at 2:05pm
So it’s in the United States’ national interest to launder money for Chinese fraudsters and gangsters?
Jose Pablo
Jan 20 2023 at 9:00am
Are Americans buying properties or companies overseas fraudsters and gangsters laundering money?
Or is it that there is a genetic unavoidable tendency in Chinese people to be fraudster and gangster while Americans are free from this terrible “Chinese gene”?
Could you , please, provide some bibliography on this genetic conundrum?
Jim Glass
Jan 20 2023 at 10:31am
With Americans getting great profits via their overpaying us for assets? …. Yes!
While undercutting the CCP? …. Yes!
A twofer!!
I mean, if your opinion is “It is in the national interest of the USA to secure the position of the CCP by enforcing its laws for it, while depriving Americans of economic gains”, just say it out loud, We can discuss that.
Thomas Lee Hutcheson
Jan 20 2023 at 2:01pm
Why should a reduction is supply of pork necessarily have led to reduced exports. Maybe the export price was better than the domestic price for some reason.
Henry
Jan 18 2023 at 2:41pm
The CCP will have to buy the farmland from the Japanese who bought it all in the 1980s.
Jim Glass
Jan 18 2023 at 6:07pm
🙂 !
Jon Murphy
Jan 18 2023 at 3:43pm
Ironically, such anti-foreigner fear-mongering may lead to the kind of “deindustrialization” that may supporters of this form of protectionism fear: https://reason.com/2023/01/17/youngkin-nixes-ford-electric-vehicle-plant-over-anti-china-paranoia/
Mactoul
Jan 18 2023 at 8:50pm
It is noised that Canada is also doing similar– restricting foreign purchase in certain big cities where housing was getting unaffordable to the natives.
Jon Murphy
Jan 19 2023 at 6:52am
And, consequently, harming Canadians
Warren Platts
Jan 20 2023 at 1:27am
Affordable housing that people actually live in is not harmful. What is harmful is purchases by foreign speculators (typically using shell companies to hide the true beneficial owner) in properties they don’t even bother to rent out.
The price elasticity for coastal cities is probably on the order of 0.1 (meaning a 1% change in quantity demanded or supplied will cause a 10% change in price. Thus it only takes a quite small foreign influx to have a drastic effect on the price. E.g., if only 10% of buyers are foreign speculators, that will double the price of housing for everyone.
Jon Murphy
Jan 20 2023 at 7:05am
Very true. But, unless one rejects price theory, reducing supply of housing does not lower the price of housing.
Warren Platts
Jan 20 2023 at 9:53am
Unless one rejects price theory, reducing demand for housing does lower the price of housing.
Jon Murphy
Jan 20 2023 at 10:34am
Only in the shortest of time frames. In anything beyond point t, forbidding demand from rising results in relatively high prices compared to what otherwise would be. Recall your basic Price Theory (firm entry/exit decisions and the formation of supply curves)
Jose Pablo
Jan 20 2023 at 11:42am
Then forbiding New Yorkers from buying houses in Virginia will reduce housing prices in Virginia.
And forbiding Richmond residents to buy property on Virginia Beach should reduce housing prices in Virginia Beach.
You seem to have solved the problem of house affordability Warren, congratulations!
Jose Pablo
Jan 20 2023 at 9:53am
“What is harmful is purchases by foreign speculators”
How does this work?
So, a Virginian voluntarily sells his house to a foreigner which is offering a higher price that any local buyer. So, the Virginian seller is now better off that in the scenario where foreigners are banned from buying houses in Virginia.
Now there are many options. But I don’t see any single one in which housing in Virginia is made less affordable.
a) The seller moves to Florida.
a1) The foreign buyer rents the house: Housing is more affordable
a2) The foreign (being a total investing moron after paying top dollars from the property and against his wife advice) lets his new expensive house empty: Housing is equally affordable
b) The Virginian seller remains in Virginia.
b1) The foreign buyer (a total, and by now divorced, investing moron) lets his new house empty
b1a) The seller builds a new beautiful house in Virginia: housing is equally affordable
b2a) The seller rents a house and invest the money from the selling buying an “affordable homes building” company: housing in Virginia is more affordable
The new Virginian seller company goes bankrupt since local zoning regulations make the building of new houses extremely complicated and unprofitable even at these high prices.
The Virginian seller and the foreign buyer became close friends since they have the same divorce lawyer and they meet at the divorce lawyer’s office frequently.
Corollary: foreign property buying does not affect house affordability but, very likely, makes lcoal divorce lawyers richer.
Jose Pablo
Jan 20 2023 at 9:54am
I don’t know why the format of the comment keeps appearing all messed up.
Sorry about that
David Seltzer
Jan 19 2023 at 5:15pm
A little basic accounting. The CCP gets the farmland and the farmers get dollars with which to consume, save or invest. From a subjective POV, there is more utility receiving dollars than owning farm land for the seller. In a sense, is the farmer is “exporting” to China?
Warren Platts
Jan 20 2023 at 2:06am
They are in the sense that the purchase of the farmland is ultimately paid for with the proceeds earned by foreign exports. But sales of assets to foreigners aren’t counted as exports in the GDP equation. Instead, they are counted as liabilities on the national balance sheet.
David Seltzer
Jan 20 2023 at 10:23am
Thanks Warren.
Jon Murphy
Jan 20 2023 at 10:35am
They’re not exports in a national accounting sense, which only measures goods and services.
Warren Platts
Jan 20 2023 at 2:56pm
https://en.wikipedia.org/wiki/National_accounts
And since foreign purchases of U.S. real estate count as capital inflows, then that’s yet one more reason why we should accurately track such purchases as assiduously as we track imports and exports: so we can get an accurate picture of the capital account surplus.
Jim Glass
Jan 20 2023 at 10:58pm
Warren Platts wrote:
And capital inflows are bad! Oh, wait…
Jon Murphy
Jan 21 2023 at 4:12pm
Well, I mean, we do.
More importantly, I find it odd coming from you given your constant harping on the current account as the major measure. Have you finally accepted that nothing is more absurd than the current account?
Jim Glass
Jan 20 2023 at 11:16am
Nah. What Jon said.
How is selling the old family farm to someone supposed to create a liability for you? Your balance sheet goes: – asset family farm, + asset big pile of cash, net change = $0. Balance sheets must balance.
If the buyers use a mortgage to finance the purchase they get a liability. Ask the Japanese who went bust from buying Rockefeller Center.
Warren Platts
Jan 22 2023 at 5:10pm
Jim, whether you like it or not, or disagree with vocabulary, I’m merely passing on what the reality is. Capital inflows are counted as liabilities on the national balance sheet. Capital outflows are counted as assets. Thus when people say the USA is the world’s largest debtor nation, what they are referring to is the Net International Investment Position. Ours is currently at about 65% of GDP. As I said before, historically, bad things tend to start happening at about 60% of GDP in other countries. It could be, however, that we are exceptional. Plus under Biden the direction has been toward lessening the NIIP, so maybe we will avoid a catastrophe!
Jon Murphy
Jan 19 2023 at 6:42pm
I got to admit, this sort of vague fear mongering drives me insane. Make a vague threat, invoke “common sense,” and then demand action based on mere supposition.
Call me old fashioned, but I believe a government, especially the American Government, should have evidence before taking away American’s liberties
Warren Platts
Jan 20 2023 at 1:34am
You have a point here, Jon, because the extent of foreign ownership of real estate in the U.S. and Canada is a total mystery. There is no systematic effort to collect such data, no reporting is required, and there is the pervasive use of shell corporations designed to obscure ownership.
Perhaps we can agree that it would be beneficial if the cloud of mystery were lifted somewhat?
Jon Murphy
Jan 20 2023 at 7:04am
The data exist. In many states, property ownership and exchange is a matter of public record.
What does not exist, at least not in any form yet presented, is evidence for the mere supposition that foreign ownership is a bad thing. All we get is vague fear mongering and “what if” scenarios.
Warren Platts
Jan 20 2023 at 10:32am
Jon, you are shooting from the hip again. The data absolutely does not exist. I’ve researched it. Yes, you can go to the courthouse & look up any given property & find out the owner, either a person or a shell company, but the citizenship of the owner is not listed, whether they have multiple passports, nor is the ownership of any shell corporations spelled out.
The burden of proof is on you to explain clearly why foreign ownership of real estate, including farmland, is a good thing. The absentee landlord is a cultural archetype, and not in a good way.
At the extreme, 100% of everything would be foreign owned and we’d all be renters. I presume you would agree that would be a bad thing (but maybe not). If so, then you’d need to explain why 50-60% ownership would be a good thing, or if that’s bad, then why 20-25% is a good thing (probably close to the current reality at least in some jurisdictions).
I guess you could argue that whatever the free market “decides,” that’s a good thing — by definition. But the problem of course is markets are never really truly free. The foreign savings glut caused by mercantilist policies of the chronic surplus countries are what generates the cash flows that need a place to park, including American real estate. Therefore, the U.S. real estate market cannot free: it’s distorted by foreign mercantilism and; therefore, the conclusion that whatever happens must by definition be a good thing does not follow.
Jon Murphy
Jan 20 2023 at 10:41am
So, the data do exist. Just because the cost of acquiring data are high doesn’t mean the data are not there. That’s like saying Mars doesn’t exist because the cost of getting there is high.
I disagree. The US Constitution, and centuries of common law, clearly spells out that the burden of proof lies with the government and through due process before freedoms may be restricted. Mere assertion, mere hypotheticals, mere imaginings are insufficient. You need evidence. Otherwise, you do not know if your hypotheticals are grounded in reality or not.
(This is true in the sciences as well. Merely building a model, no matter its mathematical impeccability, is sufficient to make a claim of truth. You need evidence)
Warren Platts
Jan 20 2023 at 2:23pm
Jon, if you’re going to lecture other people on grammar, you should make darned sure you’re right first! The singular construction of “data” is perfectly acceptable. If you doubt me, look it up.
And no, the data does not exist. The datum “percentage of U.S. real estate that is foreign owned” does not exist and will not exist until someone creates it. You are conflating the description of an object with the object described. It’s like saying the data to answer the question of life on Mars exists. If that data existed, we would know the answer to the question; as it is, the data is insufficient.
So you have no positive argument. Duly noted. That is too bad because the government is spelling out why foreign ownership of U.S. real estate (espcially by CCP agents) is problematic. I think there are at least 10 states that restrict foreign ownership of farmland. Wyoming proposed a new law last weeki. Trump himself said yesterday if he gets re-elected, he’s going to ban all ownership of PRC citizens in the U.S.
Jon Murphy
Jan 21 2023 at 10:33am
According to the dictionary, “datum” is singular, “data” are plural. Just because illiteracy becomes “acceptable” among a certain group of people doesn’t mean I should accept it.
And yes, I am the professor who takes off points for poor grammar and spelling.
Literally the first link in Google for “percentage of US real estate foreign owned.” In fact, the third link is the data collection company Statista with a detailed report.
I think describing how the law works in real life (and what separates rule of law from arbitrary government) is “positive,” but hey, what do I know?
Regardless, you have yet to provide evidence for your claims. Indeed, you say the evidence doesn’t exist. So, how do we know you’re not just making everything up?
Warren Platts
Jan 21 2023 at 12:58pm
Oh brother! You’ve gotta be kidding me! Man, I hope your students don’t read this blog because I’m constantly fixing your grammar and spelling errors when I quote you out of the kindness of my heart. This one was a doozy:
“Merely building a model, no matter its mathematical impeccability, is sufficient to make a claim of truth.”
I’m not 100% sure, but I’m virtually certain that your intended meaning was the opposite of the literal meaning of your sentance. So a little humility will serve you well, is my advice.
And FYI: since you defer to the dictionary, this is what it says wrt “data”:
Jon Murphy
Jan 21 2023 at 2:51pm
Indeed. I never said I was perfect. That’s why I have an editor for my published work and why I encourage students to use the writing services on campus.
Anyway, let’s get back to the point: what evidence do you have to support your claim? Or is it all just mere supposition?
Jim Glass
Jan 21 2023 at 3:50pm
Jon and Warren:
Being an old man, many of the usages you young kids have imposed on the world drive me nutz. But language evolves, can’t stop it, so I realize it ain’t a hill worth dying on*.
Certainly not literally!…
https://www.youtube.com/watch?v=Wbz3c5eWGbs 🙂
I don’t get mad at anybody about it. I just kick my cat.
(* Ending sentences with prepositions be fun!)
Jon Murphy
Jan 21 2023 at 4:09pm
Language certainly evolves. I do not deny that. But the rules of quotation and citation haven’t, at least as far as I am aware. When one is quoting a person and the quote is odd or erroneous, one typically writes [sic] in order to show it is a direct quotation. Basically, one uses it to show there is no error of transcription.
Jim Glass
Jan 21 2023 at 6:04pm
Jon: I agree with you as to the “sic” point.
As to the “data” argument, for the record, here’s another datum:
On last August 11, the Economist wrote a ‘policy article’ about it…
… and it goes on with the qualifications. (The spell checker for this comment says they misspelled “polarising”, in a grammar lecture, so shame on them!) Importing Latin rules into English is artificial and has never worked well. (“Ignoramuses.”) Data/datas, datum/datums, datum/data, data/data except sometimes check the qualifications list. I’ve been writing for publication for 40 years and have had to put up with it all from the start. Just learned to endure.
OTOH, turning “impact” into a verb and having it replace “affect” really cheeses me off. A couple cats have gone out the window on that one.
And, sports announcing, the announcers used to say, “Joe Montana completed 24 of 28 passes for 310 yards and 3TDs” . That makes sense.
Now they say, “Zach Wilson was 9 for 27 for 72 yards and 4 interceptions”. WTF does that mean? Apart from my team lost again.
As one gets old one’s frustrations with humanity endlessly grow. Thirty years ago I heard Grandpa Simpson say, “It’ll happen to you.” He was right. Beware!
Jose Pablo
Jan 20 2023 at 7:46am
Why should a record of irrelevant information be kept?
What is “foreign”? If a US citizen owns 5% of a building in NY thru his/her shares of a European company that is the direct owner of said building, is that “foreign” or “domestic”?
Politicians are all control freaks. That’s one of the many reasons of their incompetence.
The last thing their “control-freakness” need is cheerleading.
Warren Platts
Jan 20 2023 at 10:48am
For the same reason that when you get a (legal) job, you are required to provide proof of citizenship? No doubt you think that’s irrelevant information as well: all I can say is see you at the ballot box…
Probably they would use the same criterion as FDI: if there is more than 10% ownership (I think), then it counts as Foreign Direct Investment.
A general rule of thumb: When you find yourself agreeing with General Secretary Xi Jinping thought, you might want to reconsider your position.
Jose Pablo
Jan 20 2023 at 10:59am
“For the same reason that when you get a (legal) job, you are required to provide proof of citizenship?”
Exactly, another useless requirement that does not help in any way the American economy and does not make any economic sense.
Jose Pablo
Jan 20 2023 at 11:03am
A general rule of thumb: When you find yourself agreeing with General Secretary Xi Jinping thought, you might want to reconsider your position.
Same rule of thumb applies if you find yourself agreeing with an State Governor. Politicians made for terrible economist all over the places (as David’s post was intended to show, successfully I would say).
Jon Murphy
Jan 20 2023 at 12:10pm
Perhaps you ought to take your own advice. For the past 8 years, you’ve been his biggest cheerleader in the blogosphere.
Eyekew
Jan 20 2023 at 1:31am
It is a conundrum. Personally, I do not trust anything/person associated with the CCP (witness : Tibet, Hong Kong, WTO) and their mandate that all ethnic Chinese adhere to their demands to furnish any and all information the CCP requests.. So, how do we protect individual rights and actions, both American (including Americans of Chinese origin) and non-CCP Chinese…while avoiding vulnerability to those who would spy, infiltrate, export pork to our disadvantage, etc.?
I have just started Kevin Rudd’s book, “The Avoidable War” ..it seems an excellent exploration…not sure I agree with all of his road map. It hilights how little of the wondrous Chinese history and culture permeates most US thinking. Do we have many diplomats who are students of Chinese culture, much less fluent in Mandarin where the nuances seem so critical to understanding?
Jon Murphy
Jan 20 2023 at 12:08pm
Not sure what “export pork to our disadvantage” means, but for the others, we have legislation already on the books. If someone is spying, arrest them and show the evidence in court.
Jose Pablo
Jan 20 2023 at 7:40am
What is particularly funny (so to speak) about this kind of statements is that they are used (very similar) against Americans owning utilities or other productive companies in other parts of the world: in Europe or Latin America, for instance.
So, what Youngkin should be able to answer before doing this kind of statements is: if the Virginian ownership of the means of production is so great, why is it so rejected in other parts of the world? Maybe other parts of the world are right (if we trust majorities, democracy is so good, right?, more people are against American ownership that in favor). If they are right, what Youngkin should be banishing is Virginian ownership of Virginian land. It is a terrible kind of ownership according to an awful lot of people!
Jose Pablo
Jan 20 2023 at 9:24am
“What is harmful is purchases by foreign speculators”
How does this work?
So, a Virginian voluntarily sells his house to a foreigner which is offering a higher price that any local buyer.
So, the Virginian seller is now better off that in the scenario where foreigners are banned from buying houses in Virginia.
Now there are many options. But I don’t see any single one in which housing in Virginia is made less affordable.
a) The seller moves to Florida.
a1) The foreign buyer rents the house: Housing is more affordable
a2) The foreign (being a total investing moron after paying top dollars from the property and against his wife advice) lets his new expensive house empty: Housing is equally affordable
b) The Virginian seller remains in Virginia.
b1) The foreign buyer (a total, and by now divorced, investing moron) lets his new house empty
b1a) The seller builds a new beautiful house in Virginia: housing is equally affordable
b2a) The seller rents a house and invest the money from the selling buying an “affordable homes building” company: housing in Virginia is more affordable
The new Virginian seller company goes bankrupt since local zoning regulations make the building of new houses extremely complicated and unprofitable even at these high prices.
The Virginian seller and the foreign buyer became close friends since they have the same divorce lawyer and they meet at the divorce lawyer’s office frequently.
Corollary: foreign property buying does not affect house affordability but, very likely, makes lcoal divorce lawyers richer.
Jim Glass
Jan 20 2023 at 11:52am
What is particularly funny (so to speak) about this kind of statements is that they are used (very similar) against Americans…
Excellent point, Pablo!
The USA has $6.5 trillion in Foreign Direct Investment abroad. Think of the horrors this has caused around the world by bidding up prices above their natural level, and taking control of businesses against the interests of the natives. Plus the “national security risk” this poses to all. The German military is so weak today that an American-owned wind farm located next to a military base could simply invade it and take right over.
As to the other way around … perhaps all this furor over China buying up the USA really just cunning misdirection by the Japanese as part of a plot to avenge WWII?
The Japanese own 18 times more of the USA than do the Chinese. The Netherlands owns 16 times more. (Think of all the harm the Dutch have done to us, and we haven’t even noticed!) Switzerland owns 7+ times as much ….
The Chinese are 17th on the list, just ahead of Denmark.
Countries with the most FDI in the US.
If they get up to the level of Belgium we’ll really be in trouble.
Warren Platts
Jan 20 2023 at 1:18pm
Total American owned foreign assets are about $30 trillion. However, our liabilities (American assets owned by foreigners) total $46 trillion. Thus our net international investment position (NIIP) is currently about -65% of GDP (up from the low of -75% in 2021). Historically, bad things start to happen once a country’s NIIP gets below -60%.
As for Belgium, that’s funny that you would mention that since there is some evidence that the Belgians have been acting as a cutout for CCP investments!
Jim Glass
Jan 20 2023 at 7:58pm
Historically, bad things start to happen once a country’s NIIP gets below -60%.
Well then you should be really banging the drums against those predatory Nipponese, Netherlanders, Canucks, Brits and Germans, and of course the nasty Luxembourgers and Swiss, who together have hoarded 75% of the FDI in the USA.
Why are you instead so obsessed with the Chinese, who have all of 0.8%?? Are you part of the Japanese revenge plot?
Go after the Bermudians! i just noticed that Bermuda is higher on the FDI list than China.
As for Belgium, that’s funny that you would mention that since there is some evidence that the Belgians have been acting as a cutout for CCP investments!
You say the Belgians are helping to smuggle Chinese capital out to the West (hopefully some to the US!) undercutting the Chinese economy and Xi’s regime? Good for them! I hope it’s not just a rumor.
China, contrary to other rumors, is a largely poor and undercapitalized country. It’s per capita GDP is 1/5th that of the US, and it Premier said last year that it has 600 million people (near twice the population of the USA!) living on less than $5 a day. And it just had a terrible three years on top of all that.
With number like those, China should be importing capital investment, not exporting it. (That’s one of the reasons Xi is trying to stop it.)
It really can’t afford to squander its capital investments on overpriced foreign wind farms and empty luxury apartments in New York and London. So if you want to undercut its economy and bring down Xi and his CCP, tell the Belgians: More! More!!
Warren Platts
Jan 21 2023 at 11:37am
Why do you keep mentioning FDI when it is a tiny fraction of total foreign capital inflows? And greenfield new factories — the stuff we should actually want — are an even more miniscule fraction?
China is not undercapitalized. The problem they have is too much investment $$$ chasing too few productive investment opportunities. They really need to rebalance their economy by raising wages and enhancing social security benefits to encourage more domestic consumption. But of course, they won’t do that because excess savings = excess income for elites, and they aren’t feeling particularly altruistic.
Jon Murphy
Jan 21 2023 at 12:11pm
Doesn’t really matter. China is a very small share (1.8% of total foreign capital inflows according to the BEA). Part of the reason for that is the Chinese government explicitly forbids investing outside China (as a means to control their citizens). The US forbidding Chinese investment would be akin to helping Xi enforce his control over his population, as Jim Glass rightfully pointed out. I see no reason why the US should be an enforcer of CCP policy, especially at the expense of American citizens
Jim Glass
Jan 21 2023 at 5:09pm
Because you’ve been complaining about FDI, Chinese buying wind farms and real estate. If you want to switch to complaining about portfolio investment, fine, tell us how the Chinese buying US bonds produces ills like rent increases in Seattle and endangered security at that Air Force base in Virginia.
Also because, as Jon said, it’s the same basic picture. If capital inflows are so bad, you should be far more upset with the “big offenders” than with little China. Explain why you aren’t.
Bonus: Post Civil War to the turn of the century the US ran consistent large international trade deficits creating real international liabilities — and transformed itself from a middling agricultural economy into the world’s #1 industrial power. How was that possible while suffering from all that foreign capital investment? Explain that too.
Bonus bonus: If you were really worried that the Commie Chinese were investing too much in the USA, now that you’ve seen the numbers showing they invest so little … why aren’t you happy? “Wow, that’s a relief!”
If there was a suspicion that one of my sons had cancer, I’d be very worried. If the tests came back saying he didn’t, I’d be happy! I wouldn’t be going: “No, you dang doctor, I know he does! Look at those tests again. Take more. Look for different kinds of cancer…” But one sees this behavior all the time in political arguments.
Years ago in the early days of the Internet I had my first serious encounter with it. A Manhattan Leftie was insisting to me that the poor were really truly extraordinarily awfully poor in some particular way. Me: No they’re not. Him: Yes, they are. Me: Who says? Him: The Census: Me: The Census has a web site, let’s look. Census: The poor were *much* better off than he’d claimed. Me: There, are you relieved? Him: “You’re lucky I’m a pacifist or I’d punch you in the face!” Me: What?
It was like the poverty of the poor wasn’t at all the thing that actually mattered to him.
Jim Glass
Jan 21 2023 at 5:12pm
Tell that to 600 million Chinese living on < $5/day — in a country with only 1/5th the US’s GDP per capita overall.
Oh. OK. How? With a magic wand? If so we should try that too.
The way to increase wages is by increasing labor productivity, by increasing the investment capital your labor uses, by investing your capital at home.
(Instead of sending your investment capital to a country 5x richer than you are — such a great idea! 😉 )
Jose Pablo
Jan 20 2023 at 4:14pm
Following Cochrane, one of the symptoms of bad economics is “inconsistencies”.
I bet Glenn Youngkin supports moving chipmaking factories of American companies to Virginia. But how can be, at the same time:
a) Positive for America to have American companies’ chipmaking capabilities based in US soil
and
b) Positive for the Chinese government to move its companies’ food producing capabilities to Virginia?
Sounds like an inconsistency to me.
Jim Glass
Jan 20 2023 at 8:03pm
Sounds like an inconsistency to me.
Youngkin is a politician. That’s his job.
Informed, honest, consistent politicians get eliminated from the political gene pool really fast.
Jose Pablo
Jan 20 2023 at 10:43pm
Obviously Youngkin was just playing to the well-known antiforeign bias of the voters.
Actually, if you look at the message as a whole, you have to give Youngkin some credit for his mastering of the political discourse:
The devilish Chinese are trying to take from us a God given (not less!!) present (the “rich and vibrant agricultural lands God has blessed us with“, that’s “political poetry”!) and even more, they are trying to do something really bad with our innocent kids (“how to protect the privacy of our children online“). Not clear what precisely but you can tell, listening to him, that is going to be pretty bad).
But don’t worry Virginians, he is standing up for you against all these terrible menaces (just remember to vote for him, please).
Michael
Jan 21 2023 at 12:00pm
I believe that the main “intended” goal of this policy is for Youngkin to burnish his “tough on China” creditials in support of a 2024 Presdiential run.
Jose Pablo
Jan 21 2023 at 4:13pm
I don’t know … a reasonable voter (if such a thing exists) should not be very comfortable voting for a President in a mission to defend God’s will on Earth (well, or at least in Virginia).
Afterall the main reason for forbidding the Chinese ownership of land is that God Himself blessed the Virginians (not the Chinese) with this “rich and vibrant” lands.
On the other hand, if Youngkin is here to advance the interests of such an influential Backer, it would not be sensible at all to oppose the Virgina Governor in his Presidential run.
Jose Pablo
Jan 21 2023 at 4:42pm
I recognize that I am by now, maybe, too fixated with the inanity of Youngkin statement, but I have just realized that he is pointing at a theological problem (not an economical one, you got it all wrong, David!):
The key question is who are the individuals God blessed with the rich and vibrant lands of Virginia?
Option a: the “people presently living in Virginia”. Then if a Chinese national moves to Virginia the same day of the closing, his ownership of Virginian land is a God’s blessing and should be protected by the Governor
Option b: the “people that has lived in Virginia for the last X years”. That sounds to me very arbitrary to represent God’s will. Being eternal, God, very likely, don’t use this kind of arbitrary time references.
Option c: the people inhabiting the Virginian lands at the time Earth was created. Since the only humans back them were living in Southern Mesopotamia (where the Garden of Eden was), one should assume that God’s will is that Iraqis, Iranians and/or Saudi Arabians should be the rightful owners of Virginian lands. I find this conclusion very troubling for Youngkin!!
Option d: the first humans to set foot on Virginian lands. In this case, Native Americans would be the rightful owners of the rich and vibrant Virginian lands.
It is not an easy question. I guess that the next step for Mr Youngkin is to ask for an audience with Pope Francis that sure can help him to set light on such a complicated matter.
There is a risk, in any case, that the Virginia Governor finds the right answer very inconvenient.
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