Everyone knows that China holds much of our government debt. While that might sound ominous, the reality is that China needs the U.S. economy to be successful if it wants to keep getting paid on their investment. It’s not like China can simply take over our federal government if we don’t pay them. Our economy might be in shambles but we’d still be running it.
But while the Chinese can’t take over our government to collect on a bad debt, the same is not true for private loan defaults.
The Wall Street Journal reports that Chinese government-backed banks are coming to the U.S. The Federal Reserve has approved three such Chinese lenders that will enter the commercial lending market. Look for the Chinese banks to acquire some U.S. banks in this process.
While I’m all for more access to capital for small businesses, I am concerned about a rapidly growing Chinese government “private” business presence in the U.S. Locally-owned businesses are already losing out to Chinese companies in public project bidding competitions. With the Chinese controlling business loans and lines of credit, we are on a slippery slope to a world few of us envisioned for our future.