Last week, a Chinese investment firm agreed to purchase the Chicago Stock Exchange (CSE) from CHX Holdings Inc., which includes minority owners Bank of America, Goldman Sachs, and JPMorgan Chase.
[wcm_restrict plan =”fo-osint”]
While the deal still needs to be passed by the Securities and Exchange Commission, this move would allow Chinese companies direct access to American investors, as the CSE’s new owners control which stocks are traded on its floor.
(Analyst Comment: As China is set to break last year’s record for U.S. investment, let’s consider a few perspectives. ‘Private’ capital from China continuing to scoop up U.S.-based companies and real estate sends three messages to me. The first is often overlooked: it’s estimated that at least half, if not two-thirds, of Chinese espionage is directed at economic and industrial targets. Owning a stock exchange would provide significant cover for China to continue espionage activities among companies active on the exchange. It also cements business relations between China and U.S.-based corporations, extending the reach of Chinese espionage.
The second message is that is that lots of wealth is being created in China and investors need somewhere else to store it. Central and Southeast Asia are booming right now. Seven of the top ten fastest growing economies are in China’s front yard or at their back door. The other three are in Africa, where Chinese investment is also heavy. There are plenty of other places where investors can put their money, however, capital is flooding out of China right now because Chinese investors feel that their money is safer in the U.S. Excluding the obviously favorable terrain for espionage operations, Chinese ownership of the CSE is simply seen as a good investment. Last year, their government eased restrictions on specific foreign investments, paving the way for the purchase of U.S. real estate that met residential needs for Chinese businessmen, however loosely defined that is. This is a continuing visible trend where Chinese investors, including those who are socioeconomically upwardly mobile, can try to escape the controls of the Chinese Communist Party.
And the third message is that Chinese investors are any of the following: 1) unaware of America’s fiscal cliff, in which case they’ve joined the prestigious club of those who led the “great economic recovery” of 2015. 2) trusting that their hundreds of billions of dollars worth of investments will be protected through the downward spiral, which lends credibility to the theory that conditions will stabilize, instead of collapse, after the next global recession. Or 3) Chinese investors are aware of the deteriorating economic and financial conditions, but believe that America will fare better than China during the coming global recession and subsequent reset.)