China: To Float or Not To Float? (D)- Bank of America's Strategic Investment in China Construction Bank

Laura  Alfaro; Rafael M. Di Tella; Ingrid  Vogel

Case | HBS Case Collection | March 2006 (Revised November 2006)

China: To Float or Not To Float? (D)- Bank of America's Strategic Investment in China Construction Bank

by Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

Abstract

With its $3 billion investment in Chinese state bank China Construction Bank, Bank of America--the second U.S. bank behind Citigroup in terms of assets and market capitalization--was one of several foreign banks directly participating in China's banking sector reform. Banking sector reform was considered by some analysts to be an important complement to capital account liberalization and further changes to China's exchange rate regime.

Keywords: Currency Exchange Rate; Banks and Banking; Foreign Direct Investment; International Relations; Banking Industry; China; United States;

Format: Print

9 pages

Educators Purchase

Citation:

Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "China: To Float or Not To Float? (D)- Bank of America's Strategic Investment in China Construction Bank." Harvard Business School Case 706-031, March 2006. (Revised November 2006.)

We study a propaganda campaign sponsored by the government against the main political challenger in the days preceding the 2015 Argentine presidential ballotage. Subjects in the treatment group watched an “ad” initially aired during soccer transmissions that was part of this campaign and were then asked about their political views. Relative to subjects in the control group, their declared preference for the challenger drops by 6.5 percentage points. We find no effects of the three types of defenses employed by the challenger (a positive message unrelated to the “ad”, an answer to the accusations in the “ad”, and a counter-attack). The propaganda effect is driven by women.

Case | HBS Case Collection | July 2005 (Revised September 2019)

The U.S. Current Account Deficit

Laura Alfaro, Rafael Di Tella, Ingrid Vogel, Renee Kim, Sarah Jeong, Matthew Johnson, Jonathan Schlefer, Laura Alfaro, Rafael Di Tella, Ingrid Vogel, Renee Kim, Sarah Jeong, Matthew Johnson and Jonathan Schlefer

Investors and policymakers throughout the world were confronted with the risk of painful economic consequences arising from the large U.S. current account deficit. In 2007, the U.S. current account deficit was $731 billion, equivalent to 5.3% of GDP. The implications of the deficit were debated with intensity. At one extreme, it was argued that large deficits would eventually resolve themselves smoothly, even if they persisted for many more years. Former Federal Reserve Chairman Alan Greenspan was among those expecting a "benign resolution to the U.S. current account imbalance." Other analysts, such as economists at the World Bank, believed the large deficits raised the risk of a sharp and disorderly fall of the dollar and that necessary macroeconomic adjustment could be painful, for the United States as well as for the rest of the world. The Financial Times asked: "How long will foreigners be prepared to make such generous 'gifts' to the US?" In this environment, Berkshire Hathaway, run by legendary investor Warren Buffett, postulated that current account imbalances would lead to "some chaotic markets in which currency adjustments play a part" and announced to shareholders a plan to increase investment in overseas companies to protect against this risk. It remained to be seen what the short- and long-term implications of the current account deficit would ultimately yield.

Keywords: Macroeconomics; Borrowing and Debt; Currency; Foreign Direct Investment; Business and Government Relations; United States;

Citation:

Alfaro, Laura, Rafael Di Tella, Ingrid Vogel, Renee Kim, Sarah Jeong, Matthew Johnson, and Jonathan Schlefer. "The U.S. Current Account Deficit." Harvard Business School Case 706-002, July 2005. (Revised September 2019.) View Details

Cite View Details Educators Purchase

Faculty & Research

China: To Float or Not To Float? (D)- Bank of America's Strategic Investment in China Construction Bank

Abstract

Citation:

About the Authors

More from these Authors