There is a fact that few non-economists understand or pay attention to. China has a huge problem attracting foreign investment. US investment in China since 1990 has only been about $250 billion dollars. This is because few people trust the Chinese not to steal secrets, profits or both – their legal protections in China are few, and a virtual semi-totalitarian economy, rife with corruption, is not attractive to foreign investors. About 69% of “foreign investment“ into China is actually from Hong Kong and is thought to be laundered money or recycled domestic Chinese money. Further development is being financed out of savings instead of inward investment, which is what typically happens in a developing economy. (The British invested hugely and consistently in the United States during the 19th Century).

Meanwhile, instead of investing more in their own economy, the Chinese are making huge investments in Africa and other countries, with currently low monetary return. It is also investing in US Treasury bonds on which it gets only a 3% return. Overall its other overseas investments yield 22% compared with 33% earned by American multinationals overseas. In fact, Chinese investment overseas yields lower returns than it would were it invested in Chinese industry, and a lot of the outflow of funds is used for property boltholes in places like Vancouver and educating the wealthy Chinese young in foreign countries.

This overseas investment by the Chinese is financed by their huge trade surplus, exporting ever more and buying less food and other imports than one would expect. In short, China has a generally lower standard of living than it should have. It is not the economic powerhouse we typically imagine it is.

I am flagging this up because of the perceived threat of totalitarian China to our way of life and thus to our collective peace of mind.