From the Financial Times
US tax policies delay $2bn Chinese loan
By Henny Sender in Hong Kong, April Dembosky in San Francisco and Anjli Raval in New York
A loan worth nearly $2bn from China Development Bank to help fund an ambitious San Francisco housing project is being delayed as a result of Chinese concerns about the effect of tax policies in the US, a person familiar with the situation said.
The measures include the controversial Foreign Accounts Tax Compliance Act (FATCA), which comes into effect in 2014 and could force foreign banks to pay a 30 per cent withholding tax on the interest income on any loans made to US entities or persons.
“They need to clarify the implications of these regulations before they approve the loan,” said the person.
Schadenfreude: I wrote about the flight of capital in my American Thinker article. I expect more of this kind of retaliation, but eventually the exit of trillions of dollars more of foreign investment capital from the US.
*Certainly foreign banks are subject to US income tax on interest they earn from loans to US borrowers. That is US source income to foreign lenders.
China state banks standing up for US citizens. How can I write them in to my absentee ballot?
*What I suspect is that China has no plans to comply with FATCA. Can you blame the Chinese? China quite obviously does not believe that the US has any right to impose its tax laws on Chinese banks.
*The Middle Kingdom has no inclination to kowtow to the US or, for that matter, to any other country.
This one is really amusing to me…
Talk about unintended consequences coming home to roost in a liberal haven – SFO Surely there is an Onion Headline in this one somewhere. Where are the creative writers?
https://twitter.com/FATCA_Fallout/status/252040718477058048
All eyes to America:
US Fiscal Cliff Biggest Near-Term Threat to World Economy
‘Model simulation results show the major consequences for the global economy. As domestic demand fell, US imports would drop faster than exports, and the resulting improving trade balance would need to be matched by deterioration in trading partners’ balances, causing growth to slow. While the world economy would still grow 1.3% in 2013, this is just half our baseline forecast of 2.6%. The potential contagion effects from greater stress in the US financial sector and asset markets could further amplify the negative effects on the global economy. ‘
http://www.fitchratings.com/web/en/dynamic/articles/US-Fiscal-Cliff-Biggest-Near-Term-Threat-to-World-Economy.jsp
No mention of the exacerbating effects of FATCA. DATCA. Hold on to your hats.
Bubble – I really think it’s *worthless* to track US fundamentals in any category. The US deliberately trashes their statistics. Most recent example: USD comes close to a recent high against the EUR, the Federal Reserve announces inclination towards QE3 and dollar drops and EUR rises. They DON’T want to be the “best” performer. This isn’t 1999 anymore. This is really dishonest behavior, and somewhat counter-intuitive to most of us, but it’s the way they have been handling things since 2001. When it will go back to normal, I have no idea; probably not anything soon though.
Remember all, the US credit downgrade was succeeded by downgrades in many other countries. Ratings agencies have lost a lot of credibility since 2008. I remember a short time before this, these same ratings agencies were endorsing certain mortgage-backed securities that are now worth $0. Point is: Don’t trust anyone else, just the lump that is between your 2 ears. If you hear/smell risk. then stay out, no matter what “genius” is saying on TV.