A US default might lead China to buy American companies instead of American bonds, some analysts say

[applegrove]

A US default might lead China to buy American companies instead of American bonds, some analysts say.

US debt ceiling: How risky for China and Japan?

by Peter Ford, Staff Writer, Justin McCurry, Correspondent at the CS Monitor

http://www.csmonitor.com/World/Asia-Pacific/2013/1008/US-debt-ceiling-How-risky-for-China-and-Japan

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“Even a temporary default would have a very deep impact on the Chinese authorities’ thinking” about the creditworthiness of the US government, Mr. Xiang believes.

And while diversifying official investments might be hard, given the continuing crisis in the eurozone and poor returns in risky emerging markets, a US default might lead China to buy American companies instead of American bonds, Xiang suggests.

“It would make the government change the way it manages foreign exchange,” he says, by reforming Chinese capital markets. Instead of soaking up private companies’ dollars, the government would encourage the firms to invest them abroad themselves.

“America would have to open up more to Chinese investment,” Xiang says. “Even a temporary default could have quite a significant effect on US-China relations.”



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[DonCoquixote]

1. and thus the country is sold

to the communists..

[roamer65]

2. Guess we had better get used to Mao on our money.

Renminbi yuan notes have Chairman Mao on the obverse.

[FarCenter]

3. Doubtful that they would buy in the US -- more likely they would buy assets in SE Asia

The Chinese have been increasing their direct investments in SE Asia and in countries that produce the raw materials and agricultural products that they need, like Brazil.