At this Cafe Hayek blog post, commentators Ed Rector and Tony Hart echo similar concerns. First, Ed:
In other words, foreigners owned 17.46% of US assets in 2000 and foreigners owned 26.41% of US assets in 2009.
What is overlooked in the series of posts on the trade deficit vs returning capital flows is that those foreign-owned US assets earn a return that is presumably paid to those foreign owners.
and now Tony:
So, Griswold tells us about US assets owned by foreigners. What about foreign assets owned by US citizens and businesses? And then compare the incomes going out and coming in.
Both echo concerns that a greater share of US assets (that is, assets that are located in the US), are now owned by foreigners. For some reason, this is a bad thing (although neither elaborate why). But there is little reason to be concerned in these numbers.
First, the capital stock of the US (and indeed the world) is not fixed. The fact that a greater share of US assets are owned by foreigners does not necessarily mean that fewer assets are now owned by Americans. Indeed, as Griswold’s data (in the linked blog post) show, American-owned assets have been rising, too! Americans are getting more productive and foreigners want a piece of that pie, too.
Second, the fact that assets are foreign-owned is not, as is often insinuated (to be fair, not by these two comments) a national security threat. If anything, it reduces security issues. As economic ties build between areas, then the risk of conflict falls. Foreigners earn returns on their investments, which makes the cost of going to war higher. Sure, there may be some assets you don’t want owned by a potentially hostile foreign nation (power plants, weapon factories, etc), but that’s not what’s being bought. Trust me, the Swedes aren’t going to weaponize their Ikea stores.
Third, in a direct response to Tony’s comment above, the fact that foreigners are investing more into the US than we are investing elsewhere is a good thing. It’s not a sign of US weakness; it’s a sign of US strength. It indicates the US holds better opportunities for investments than other options in the rest of the world. Just logically, it doesn’t make sense that foreign-owned assets make the US weak: no one boards a sinking ship just to plunder its treasure.
Fourth, in direct response to Ed above, the fact that foreigners earn returns on their investments is, again, a good thing. It means those assets are productive: their producing goods/services valued by Americans, they’re employing Americans (generating payroll and the like); in short, they’re being useful. Again, this is a testament to the strength of the US economy, not a weakness. The fact that the returns go to someone on the other side of an imaginary line is meaningless.
The tl;dr version of this post: I fear assets owned by a Chinese person no more than I do assets owned by a North Carolinian.