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Midweek Stewardship: No Land for China

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What is the Issue?

The title sounds like something the “Soup Nazi” from Seinfeld fame would say.  Yet, there is in fact a movement afoot in the United States to restrict the amount of US land that Chinese entities can purchase.  It is true that Chinese purchases of land, particularly farmland have increased by a large amount, almost tenfold between 2009 and 2016.

Obviously this is driven by fear of a China that is rising both economically and politically.  China obviously has a much more developed economy than since they started allowing more liberalized markets in the late 1970s.  They now have the second largest economy on the planet, although not nearly so when measured on a per capita basis.  Politically China has scored some real diplomatic success by brokering a rapprochement between Saudi Arabia and Iran.  This may even lead to a ceasefire to the war in Yemen, which has seen these two nations on opposite sides of a brutal conflict.  China has also offered a general outline of a peace deal between Russia and Ukraine.  This has received some favorable response from even NATO member France.  So it cannot be gainsaid that China is on the move.

The US increasingly sees China as a geostrategic economic and imperial rival.  This has led to trade restrictions in recent years.  It has led to calls for the banning of the partly Chinese owned app Tik Tok. The fear of Chinese land purchases fits within this overall context.  Generally the US sees Chinese ownership of land, especially farmland as a threat to US food security and as also posing surveillance threats as some land is not too far from US military installations.

Why This is A Bad Idea Part I

The idea of banning Chinese ownership of US land is a bad idea for a number of reasons.  Part I of this bad idea is that the idea rests on overblown fears and represents a potentially dangerous break in relations.  This post is mostly about the economic/stewardship effects so here I will be brief.  The fear, like most fears in life, is overblown.  True, Chinese entities have purchased an increasing amount of land in the US, but even after this tenfold increase the total that Chines entities own is just about .9% of just foreign owned US agricultural land.  This is according to the USDA.  This hardly constitutes control of the US food supply.

In any event, how could the Chinese actually control this land in the event of a hot war breaking out.  It is not as if they can pack up the farm acreage and take it back home.  In the event of hostilities the US could do what governments have always done-expropriate the land. 

As far as surveillance fears go, the US could mitigate these fears by heightening the security around military installations.  One can reasonably question why they have not done so already.  Most major US security leaks have been perpetuated by US citizens.  It hardly seems necessary to ban all Chinese ownership of land simply because they might do something nefarious.

There is also the risk that a move like this would short-circuit dialogue and interaction between citizens of the US and China.  At a time of heightened tension why add to this by trading on overblown fears that serve only to invite and perpetuate a cycle of retaliation? 

Bad Idea Part II

Now to the heart of the objection in a stewardship post.  To ban Chinese ownership of US land is terrible economic policy and ultimately self-defeating.  To embrace economic illiteracy is to engage in poor stewardship of what God has given us.  I have posted about trade previously, here and here.  The reason I link to these pieces is that the phenomenon of Chines purchases of US land is intricately linked to global trade.  A brief review is in order.  If a Chinese or any foreign entity sells something in the US, they are paid in dollars.  The Chinese company cannot take these dollars and spend them in Beijing, as they use renminbi there. 

By definition there are only two things a foreign exporter can do after selling goods in the U.S. market. Since they are paid in U.S. dollars and cannot spend those dollars in say Beijing, they can either use those dollars to buy U.S. goods to ship back to their country or they can use those dollars to invest in businesses here in the U.S. Either way the US wins, as the entire economy is made more productive, therefore wealthier and more jobs are available both here and overseas. Briefly, the third thing that can happen is that the foreign entity can exchange their earned dollars for another currency, say Euros or Yen and then the new holders of those dollars have the same two choices as outlined above.  One of the investments that the Chinese company can make is US land.  This may include all manner of real estate, including farmland.

We must also keep in mind that the point of global trade is the same as domestic trade, to acquire those things we cannot efficiently produce ourselves.  As a thought experiment simply look around whatever room you are in and then imagine having to produce all of these things yourself.  Keep in mind that means you must produce the tools that made these things, and the tools that made the tools that made these things, and so on.  No trade means no division of labor and that means grinding poverty for humanity.  To cut off one or more of the steps that make global trade possible is to intentionally impoverish yourself and your neighbors.

In the particular case of preventing the sale of US land to Chinese companies it will only serve to dampen demand and therefore saddle the current owners with a lower price than they could otherwise obtain on an open market.  It will also serve to either drive Chinese money flows into less productive areas of the US economy thereby lowering production below what it could otherwise be, or to discourage the sale of these products into the US in the first place.  This will only raise costs for US consumers and make the US materially worse off.

If there is no avenue for trade to flow into productive areas it will not occur at all.  All this serves to do is retard capital formation and wealth creation.  Yes, the Chinese will be harmed, yet so will the US.  It seems that this is no way to steward the resources God has put into human hands.  When we beggar our neighbor, we beggar ourselves.  As per usual those who suffer the most will be those least among us.  As always good stewardship involves peace and freedom, which in this case ,since we would all be better off, this should be an easy lift.

Praise Be to God

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