This is a part of the shocking proposal that has been developing secretly by Beijing since 2009 to commute more than $1 trillion of U.S debt it owns into equity.
According to the plan, China wants to own U.S. businesses, U.S. infrastructure and U.S. high-value land, all with a U.S. government guarantee against loss.
Yu Qiao, a professor of economics in the School of Public Policy and Management at Tsighua University in Beijing, thought of this plan, back in 2009, for the U.S. government to insure foreign investments in the United States.
WorldNet Weekly has reliable information that the Bank of China, China’s central bank, has continued to proceed the plan to convert China’s holdings of U.S. debt into equity owned by China in the U.S.
The Obama administration, under the plan, would grant a financial guarantee as an incetive for China to convert U.S. debt into Chinese direct equity investment. China would take ownership of successful U.S. corporations, potentially profitable infrastructure projects and high-value U.S. real estate.The plan is designed to motivate China to resume lending to the U.S. on a nearly zero-interest basis.
However, converting Chinese debt to equity investments in the United States could easily add another $1 trillion to outstanding Obama administration guarantees issued in the current economic crisis.
The problem is that, in a struggling U.S. economy, China does not want to trade its investment in U.S. Treasury debt securities, with their inherent risk of dollar devaluation, for equally risky investments in U.S. corporations and infrastructure projects.
“But Asians do not want to bear the risk of this investment because of market turbulence and a lack of knowledge of cultural, legal and regulatory issues in U.S. businesses,” he stressed. “However if a guarantee scheme were created, Asian savers could be willing to invest directly in capital-hungry U.S. industries.” Yu Qiao’s plan included four components:
1.China would negotiate with the U.S. government to create a “crisis relief facility,” or CRF. The CRF “would be used alongside U.S. federal efforts to stabilize the banking system and to invest in capital-intensive infrastructure projects such as high-speed railroad from Boston to Washington, D.C.
2.China would pool a portion of its holdings of Treasury bonds under the CFR umbrella to convert sovereign debt into equity. Any CFR funds that were designated for investment in U.S. corporations would still be owned and managed by U.S. equity holders, with the Asians holding minority equity shares “that would, like preferred stock, be convertible.”
3.The U.S. government would act as a guarantor, “providing a sovereign guarantee scheme to assure the investment principal of the CRF against possible default of targeted companies or projects”.
4.The Federal Reserve would set up a special account to supply the liquidity the CRF would require to swap sovereign debt into industrial investment in the United States.
“The CRF would lessen Asians’ concern about implicit default of sovereign debts caused by a collapsing dollar,” Yu Qiao concluded. “It would cost little and help the U.S. by channeling funds to business investment.”