China Goes Shopping, World Throws Open Its Doors

The NYT reports on a recent surge in China’s foreign direct investment.  China is taking advantage of a savings stockpile and cheap energy prices to seure itself reliable flows of energy into the foreseeable future.

While similar moves by china in 2005 to buy American firm Unocal were undone by fear and suspicions, no such xenophobia is likely to stand in its way now, given the economic downturn.  The only open question is whether there’s any recourse for the Obama Administration.

There is one clear option — removing oil subsidies and raising the gas tax.  Such a move would dampen demand while raising capital that could be invested in a range of alternatives that might free us from this sort of zero-sum competition with China.  Tom Friedman and others have been talking about this course for years, but it’s taken a back seat amidst our current troubles.  We need to act NOW before we face rising energy prices AND shrinking GDP. 

The stimulus is certainly a start in the right direction, but the effort won’t be fully believable until the Administration addresses the web of cross-cutting and self-defeating incentives we’ve currently got in place.