Mitt Romney Jumps the China Debt Shark: Update

October 16, 2012

China is poised to lose its place as the U.S.’s biggest creditor for the first time since the height of the financial crisis, blunting one of Mitt Romney’s favored attacks in the presidential campaign.

Chinese holdings of Treasuries fell 0.2 percent this year through July to $1.15 trillion, the latest government data show. Japan, a stronger ally of the U.S., raised its stake by 5.6 percent to $1.12 trillion, on pace to top the list of foreign creditors by November. (Bloomberg)

Question: does anyone care? Answer: Not really.

I wouldn’t have thought twice about this story if it wasn’t for the fact that there is an entire industry out there in and around Washington devoted to pushing the scary notion of China as the evil banker that will, at some point in the near future, swoop in and foreclose on the United States.

Mitt Romney, would-be president, has been pushing the hell out of this theme for months now. He commonly tacks on snide comments about borrowing money from China when discussing fiscal policy choices. For example, instead of just saying that he doesn’t like the Public Broadcasting Service, he says this:

I like PBS, I love Big Bird. Actually like you, too. But I’m not going to — I’m not going to keep on spending money on things to borrow money from China to pay for.

This is a favorite line by U.S. politicians, particularly those who are trying to justify austerity and fiscal restraint. If they want to cut something, that argument is apparently strengthened when they can say to their opponents: “This is so important that you are willing to borrow from the Red Communist Chinese to pay for it, hmm?”

I wrote about Romney’s problems with this line of attack less than a month ago, noting at the time that:

By the way, #2 on the list of foreign creditors is Japan, which has been upping its purchasing of U.S. treasuries this year, while China has been reducing its buys. As of July, China held only about $40 billion more than Japan. That gap might even be narrower now.

Looks like that gap is now zero, with Japan looking to break away from China. Romney’s comments were always ridiculous, and now even more so. But will we see any change in the Romney campaign in response to the facts?

Ha ha ha. No, of course not. Why should he? Journalists won’t ask him about this issue and the Obama camp would probably rather not talk about any topic that includes the word “debt.” Moreover, to be honest, the public doesn’t care either.

Unfortunately, if no one pushes back on this, Romney will continue with the China bashing and millions of Americans will continue to believe that China is U.S. Banker #1.

One thought on “Mitt Romney Jumps the China Debt Shark: Update

  1. David Fieldman

    With respect to Romney’s China bashing, this should interest your readers.

    Romney’s Stake in Chinese Stocks

    The GOP candidate invested in 10 Chinese companies recently—including ones that embezzled, partnered with Iran, and stole US trade secrets.
    —By James West – Mother Jones
    | Tue Oct. 9, 2012 3:00 AM PDT

    On the campaign trail, Mitt Romney rips President Obama’s policy on China and talks tough against the rising global power. “We’re going to crack down on China,” he said at a recent event in Ohio. “They’ve stolen our jobs; that’s gotta stop.” But according to Romney’s recent tax returns, between 2008 and 2011 Romney invested more than a half million dollars in the stocks of 10 Chinese companies—including firms that embezzled, partnered with Iran, and stole US intellectual property.

    Through Romney’s individual and family “blind” trusts—managed by his personal lawyer, R. Bradford Malt—the Romneys traded more than 25,000 shares in Chinese firms, including some based in Hong Kong. Some of these investments have previously been reported in the media and raised by the Obama campaign, but others have gone unnoticed. Overall, the stock investments netted the Romneys a profit of more than $90,000 in 2010 and 2011. (Some of the individual investments were losers.) While that sum is a pittance in light of the candidate’s vast personal wealth, it represents a significant amount for ordinary working Americans. Romney has long invested in China, putting millions into Chinese firms back when he ran Bain Capital, as MoJo’s DC bureau chief David Corn first exposed in several reports this summer.

    Romney has said that he has no role in managing his personal investments; one of his aides told the Financial Times recently that Malt works “to make the investments in the blind trust conform to Governor Romney’s positions, and whenever it comes to his attention that there is something inconsistent, he ends the investment.” But back in 1994 Romney himself said that blind trusts don’t absolve an investor of responsibility: “The blind trust is an age old ruse, if you will, which is to say, you can always tell the blind trust what it can and cannot do. You give a blind trust rules.”

    Here are the investments in 10 Chinese companies revealed in tax returns for the W. Mitt Romney Blind Trust (2010 and 2011) and the Ann and Mitt Romney 1995 Family Trust (2010) and (2011):

    Industrial and Commercial Bank of China
    “Gov. Romney believes China should be labeled a currency manipulator,” his spokeswoman said recently, “and he will move to label them as such on Day One.” Yet the candidate invested in Industrial and Commercial Bank of China, the country’s largest bank. Some experts say that China’s central bank still exerts power over ICBC (which was privatized in 2005) to carry out the country’s monetary policy. The Romneys invested in more than $80,000 worth of shares, ending with a loss of just over $5,500.

    China Merchants Holdings International
    The Romneys invested more than $78,000 in this Hong Kong-listed company, China’s largest public port operator. Its parent company, China Merchants Group, is one of the longest-running state-run corporations in China. They sold the shares at a loss of about $6,500.

    China Life Insurance
    About a fifth of Romney’s China profits came from China Life Insurance, the mainland’s largest life insurer. In 2009, according to news reports, China’s National Audit Office found that the firm had embezzled nearly $172 million—overstating sales, improperly settling claims, and lining executives’ pockets with millions of yuan. The following year, the Romneys made more than $20,000 when they sold their shares.

    China National Offshore Oil Corporation
    The Romneys invested nearly $77,000 in China National Offshore Oil Corporation from 2009 to 2011—even as US sanctions called for divestment of companies that do business with Iran’s energy sector, as CNOOC does. The Chinese oil giant’s parent company is helping Iran develop the North Pars natural gas field in a deal estimated to be worth $16 billion. The Romneys sold their shares in CNOOC for a profit of more than $15,000.

    New Oriental Education and Technology
    Campaigning in Virginia recently, Romney said of Chinese companies: “They steal our technology, they hack into our computers—they also steal our know-how, our patents.” But the Romneys also invested in New Oriental, a company infamous for stealing copyrighted exam questions from a US firm. In 2001, New Oriental was sued by Educational Testing Service for stealing and distributing proprietary test questions for admission to US universities. A Chinese court ordered New Oriental to pay over $1 million, a sum reportedly reduced in 2004 by Beijing’s High Court. The Romneys made more than $20,000 from the nearly $60,000 they invested in New Oriental shares.