China Inc.

The news about China's new investment company to handle its reserves is quite astonishing. Indeed, many of the investment analysts around the world are wondering. Is China indeed beginning to move around like a great economic power? After all, it has one trillion dollars, and more if you include offshore actors. The global economy is defiantly interconnected.

Chinese officials said they planned to form a government investment firm to manage some of its holdings, an indication that China has tired of earning small and predictable returns and wants to look elsewhere.

"It's entirely possible that they are ready to diversify their investment portfolio," said economist John Silvia of Wachovia Corp., who predicts that any changes would not come quickly.

The Chinese have been threatening for several years to look in new places for safeguarding their ample reserves.

For Americans, "this will be a challenge, no doubt about it," Silvia said. "It likely will mean higher mortgage rates and a weaker dollar. But these effects could take 5 or 10 years to be fully felt."

This being the case, the American economies interdependence with the Chinese investment company is worrying. Coul the Japaneese buyouts of American property in the 1980's be used as a model for the Chinese investment company? Time will tell, and our analysts will keep tabs on this important story.