Econ question: how does capital move? [View All]

[German-Lefty]

Hey I've been thinking for years of writing some kind of space game like VGA planets or Master of Orion with some more realistic economics. Maybe it could even simulate some phenomena of today's globalized economy. If anyone's heard of anything like this let me know.

How does capital move in the real world?
Let's say you've got China with lots of labor and low capital and the US with lots of capital and no labor. They start trading with each other. Obviously it's a lob sided situation that has to balance itself out.

I've got a couple ideas how this could happen. Does anyone know which of these happens most in reality?:
1) Factories are disassembled and moved toward the cheaper labor?
2) Capital is allowed to depreciate and all the new investment is made where it is needed more.
3) Capital goods are produced by the wealthy country and loaned to the poor one.
4) Goods are produced in the wealthy country and sent to the poor one to free up production which then goes into investments.

#4 doesn't happen. Goods from China are pumped into the US not the other way around.

I'm guessing it's some mix of #1 and #2 depending on how mobil capital is. Does anyone know how much of the capital is mobil and not. Obviously buildings aren't and they account for a lot of capital. Intellectual property on the other hand moves very easily.

Does the poor country build up it's own capital stock by itself with it's own production or trading it's production for capital goods? It seems like the rich country should finance the poor one. Of coarse that might be a hard sell: "Citizens you're going to have a X% decrease in living standard so the Chinese and We will have it good next generation."