What Can China Do With $2 Trillion

So China now says it’s going to use its $2 trillion in reserves to purchase real assets instead of just accumulating foreign exchange reserves and financial assets. Good luck!

Two trillion dollars is an awful lot of money. In fact, it’s almost not possible to spend that much money without buying a big piece of the world. The Wall Street Journal Real Time Economics blog has a good illustration of just what it would buy:

  • all the land and property in New York City, Los Angeles and Boston
  • 73% of the market capitalization of the Dow Jones Industrial Average at the end of June
  • 25% percent of the market capitalization of the S&P 500 at the end of June

Of course, if it did try and gobble up assets like this you can bet that every politician in this country or any other would be screaming to high heaven about it. China, of course, knows full well that it’s limited as to how much any given country is going to sell them, whether that be natural resources, real property or business enterprises. They are as much in a corner as those who owe the money find themselves.

The old adage about borrowing a little and you owe the bank but borrow a lot and you own the bank never rang truer. China is going to be sitting on those reserves for a long, long time, so it best get on with using them to develop its domestic economy.

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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