Paper Summary:

The paper discusses how Japan and China are the top foreign investors
in the United States who manipulate foreign exchange rates and affect the foreign exchange rate of the dollar. The paper explains the dynamic by which foreign investment from other countries is increasing in both value and volume, while the US investment in other countries is yielding smaller returns, and causing the dollar to drop. The paper points out that these Asian countries are clearly benefiting in this dynamic from an economic standpoint. The paper discusses how Americans are concerned about a potential economic crisis that could result if the foreign investment continues to rely on US consumption activity, but the US government is reluctant to disrupt the flow of capital into the country, regardless of these concerns.

From the Paper:

"The country that had the most direct foreign investment is kind of a two headed monster. Japan is the overall leader, but China's pace of investment and growth as an investor has increased tremendously and at the highest rate over the last five years. These countries are the top foreign investors. In 2006, Japan was showing the largest holdings of long term US Treasury Securities, and they were followed by China, at $350 billion.
"Today, these countries have holdings of $586.6 for Japan, and $486.9 for China, which China leveling off for the first time in February after a period of dramatic growth over the last five years (Major Foreign Holders, 2008)."

Sample of Sources Used:

• "Foreign Investment." 2008: http://usinfo.state.gov/products/pubs/economy-in-brief/page12.html
• "Foreign Investors Buy Stakes in US." Boston Globe. January 20, 2008: http://www.commondreams.org/archive/2008/01/20/6494/
• "MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES." 2008http://www.ustreas.gov/tic/mfh.txt

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