Will China Help Refocus the Market on the Long Term?

Many Americans fear that China may curtail its buying of Treasury bonds, which could drive up interest rates and slow economic growth. But less Chinese investment in Treasuries might be a blessing in disguise-if the funds were redeployed in more US equities and direct investments in companies or real assets. Ultimately, the author thinks that such Chinese investment in the US will be good for both countries. China would benefit, because expanded foreign investment would allow it to participate more widely in the global economy and acquire local distribution, manufacturing and marketing presences in other markets. The US would benefit, because the Chinese evaluate acquisitions based on long-term considerations. This could spark the repricing of many extremely undervalued companies and initiate a potent cascading effect. Stepped-up Chinese investment in the US (and elsewhere) could be the catalyst for unleashing pent-up demand and capital spending.