Oh, the US economy will never be the same again. China is planning to make use of its $1 trillion currency reserves, for greater profit. Uptil now, Uncle Sam has been riding off the dollar devaluation, to reduce its debt at the expense of foreign debt-holders.
But soon the game will come to a head, once China brings its trillion+ dollars into the game. Then we'll see a showdown on whether the US will allow Beijing's minions to buy US companies and fixed assets unimpeded. I predict the Americans won't, with an activist US Congress moving to block key acquisitions, and this in turn would lead to China taking a step back from its US treasury purchases, precipitating a crisis with a run on the dollar.
A severe uncontrolled drop in the dollar would force the US to hike interest rates sharply, bursting the housing market, as vulnerable mortgage-holders get caught in between. Costs of foreign imports would also sharply rise, triggering high inflation.
India, with its lower manufacturing costs, could potentially position itself as a small White Knight to help the US mitigate the damage, with the tradeoff of gaining greater penetration into US markets. Note that Indian takeovers and acquisitions of US companies haven't garnered the same hostility as similar Chinese forays, because Indian-based MNCs are truly private and not flunkies of the state.
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