Investigate China's local economic threat

This weekend U.S. and Asian defense officials met in Singapore to discuss Asian-Pacific military security strategy with China dominating much of the conversation.  China has been increasing its military presence in the region and the U.S. has been adding Marines in Australia and Philippines while planning to send more combat ships to the area. 

While Secretary of Defense Leon Panetta says on one hand that a peaceful relationship between our two superpowers is in everybody’s interest, China’s growing military aggressiveness is clearly a big U.S. concern.   

The question is why the Administration and Congress are worried only about a military threat?  The communist Chinese government doesn’t need to destroy our country with weapons and armed forces when it can simply own us. 

I’ve recently blogged (here and here) about my concerns on this issue.   The problem isn’t necessarily the amount of our government debt owned by China.  Typically anyone buying U.S. Treasury notes has a vested interest in our country’s success not collapse. 

But it appears that the Chinese aren’t satisfied with just making money from funding our government.  It is also making significant inroads into capturing important pieces of our business economy. 

And I’m not talking about privately-held Chinese businesses.  That would at least be the free market in operation. 

Chinese government-owned banks are now being allowed to operate in the U.S. to compete with our community banks and credit unions for commercial loans to small businesses.  Chinese government-owned construction companies are winning bidding wars with American businesses for public sector projects across our country.

Small businesses already know how hard it is to compete against big businesses.  Competing against a Chinese business with unlimited government subsidies is impossible.

Last week the Board of Directors of the South Carolina Small Business Chamber decided to launch an exploration into exactly what is the extent of China’s threat—not from warships sailing into the Port of Charleston but to our state’s small businesses and economy. 

The Chinese are now truly coming

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.