China has now officially explained its reasons for preventing U.S. Ships from entering Hong Kong's harbor recently to seek shelter and supplies during a storm at sea. 

China blocked the visit to Hong Kong last week of a United States aircraft carrier battle group and other American warships in retaliation against the Bush administration’s proposed upgrading of Taiwan’s Patriot anti-missile batteries, Chinese state media reported today.

This is EXACTLY why sovereign wealth funds investing in the U.S. are unrelated to free trade or free markets.  It is foreign policy and national security. 

Consider this hypothetical scenario, which is closer to reality than you want to believe.  A Chinese government owned company acquires a majority stake in a major U.S. lending institution named, for example, American Mortgage Company.  The U.S. has a mortgage crisis.  Separately, our President welcomes the Dalai Lama for a high profile state dinner.  China protests by cutting off mortgage applications for 2 weeks, or increasing the rate of foreclosure proceedings over a 3 month period.

Just a foreign policy matter.

Yup.  But it's not free trade.  It's not ordinary foreign investment.  And its not "the free market working."  Its naivete.

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