Growing Chinese investment around the world is a major international economic development. In the U.S., the story is how limited Chinese investment is beyond government bonds.

Limitations on Chinese investment in the U.S. are not imposed by the PRC. Other than bonds, the PRC invests primarily in natural resources, and the U.S. has such resources. The U.S. is the largest natural gas producer, may top the world in coal reserves, and even has high-cost oil reserves China has shown interest in elsewhere. The U.S. also has various metal ore deposits and the world’s largest amount of arable land.

China doesn’t invest widely in the U.S due to political interference here. For understandable reasons, Chinese investment in technology has been blocked. For less understandable reasons, the U.S. does not seem to have a consistent policy regarding Chinese investment in resources or, for that matter, manufacturing.

The PRC’s “go global” program was essentially launched by Lenovo’s purchase of IBM’s personal computer division in late 2004. It was sharply redirected when CNOOC was not permitted to buy UNOCAL in 2005. China then turned to Australia, which draws considerably more Chinese investment than the U.S. does, even though its economy is less than one-tenth the size of the American economy. The PRC’s spending in Canada is now rising sharply. Why are these democratic American allies with comparatively small economies unconcerned with Chinese investment?

The one use for which Chinese money is welcomed by Washington is, of course, financing massive federal deficits. There is nothing wrong with the PRC buying American debt. But the amount of debt is certainly a problem, whoever finances it. Accepting $1.5 trillion in Chinese purchases of government debt, while inhibiting far smaller amounts intended for American companies, is a policy that should be carefully examined.

Co-authored by Subha Hariharan.