At the height of Japan's 1980s economic bubble, Japanese capital could not leave the country fast enough. Profit margins were so thin, and the Japanese so aware that they were on thin ice, that the logical choice was to invest abroad. During this time, Americans — seeing landmarks such as New York's Rockefeller Center being snapped up like hotcakes — became convinced the game was up and Japan was on the verge of displacing the United States as a global superpower. By 1990, however, the Japanese bubble had burst, setting off a long slide from grace that involved four recessions, deflation that Japan has yet to recover from and a series of disastrous prime ministers married to a disproved economic model that has condemned Japan to economic malaise. The key development in all of this was the foreign purchases. At that point, the Japanese began to believe their system was failing — despite the rosy news about the Japanese miracle. Now the news of the day talks of the "Chinese miracle," and a similar mentality is taking root in China. The Hang Seng and the Shanghai Composite, China's two largest stock markets, have traded from sideways to down for five years. If China is really booming, where is all its money going? As it turns out, China is sniffing around internationally for things to buy. Since most of the heavy money in China is tied into the state in some way, it is government money as much as private cash seeking safe havens. This has given a strategic direction to much of the capital flow. In particular, China's three state-owned oil firms — China National Offshore Oil Corp. (CNOOC), Sinopec and China National Petroleum Corp. (CNPC) — have been aggressively snapping up assets wherever they can. Between them they already hold production assets in Yemen, Venezuela, Peru, Indonesia, Canada, Thailand, Myanmar, Turkmenistan, Azerbaijan, Oman, Sudan, Kazakhstan, Australia and Syria. Most recently they have failed in their attempts to acquire big-ticket items. In December 2002, a Russian politician edged CNPC out of making a bid in the privatization of Slavneft, a Russian state oil firm. In May 2003, CNOOC and Sinopec tried to buy into Kazakhstan's Kashgan super field, but were rebuffed by the project's other partners. Most recently, during the Yukos saga, Chinese firms were similarly urged to not take part in outright bidding for subsidiary Yuganskneftegaz, although there could still be room for them at the post-auction vulture feast. China appears to have learned its lesson from the Russian attempts. Nationalism was a key factor in defeating the Chinese bids, so this time around Beijing is acting a bit smarter. Just before the New Year, Chinese electronics firm Lenovo shucked out $1.75 billion to purchase IBM's problem-plagued PC business. It is difficult to imagine any Americans getting overly stressed about a has-been computer manufacturer being sold, but with one fell swoop Lenovo became the third-largest PC firm in the world. China let it be known with the acquisition that it was seeking to turn its growth at home into power positions abroad, and that it was going to be doing so in strategic industries. Also in December, Chinese state firm Minmetals bid $5 billion in a failed attempt to buy Noranda, the Canadian mining giant. The recent news that CNOOC is examining the possibility of a $13 billion buyout of Unocal, a major U.S. oil firm with considerable Asian assets, is a continuation of this trend. It marks a shift for Chinese oil firms away from efforts to acquire asset packages and individual oil fields, such as those that failed in Russia, and would represent China's largest foreign acquisition to date. While normally this might spark concern in the United States, CNOOC was quick to note that it had no intention of hanging on to Unocal's U.S. assets, a line which should effectively soothe both U.S. interests wary of China's growing economic power and anti-trust watchdogs. While discussions are in very early stages, CNOOC claims it is looking at other foreign firms as well, and said that its goal is to become a player in Asian energy markets, particularly with regard to natural gas. While natural gas assets will be important to China's future, it has far more pressing needs for oil assets, which makes that suggestion by CNOOC a somewhat curious one. As with essentially all things in China, however, there is a larger story below the surface. Establishing itself in a high technology industry and assuring commodities supplies are legitimate strategic goals for the Chinese economy's voracious appetites. The fact that both the Chinese private and state sector are seeking to move significant amounts of capital overseas as opposed to investing at home, however, is a reflection of perceptions of the condition of the domestic economy. As was the case in Japan in the 1980s, this sudden interest in large overseas acquisitions is also a thinly veiled means of capital flight that is likely to continue given the vast imbalances that are beneath China's economic growth. China's is not a developed economy but a developing one, which means its focus should be on building a solid economic foundation at home. The fact that its largest firms, both public and private, are trying to go abroad instead of continuing that development at home does not bode well for China's economic future.