WASHINGTON, DC, May 4, 2011 — I really appreciate the warm welcome from Ambassador Roy and Orville Schell.
I'm pleased to be here, roughly one week from the start of the Strategic and Economic Dialogue, to help launch this report on Maximizing the Benefits of Chinese Foreign Direct Investment.
For decades, the U.S. has welcomed foreign investment with:
- A market-based economy supported by a fair and transparent legal system;
- The most productive and best educated workers in the world; and
- Vast natural resources.
This openness has made the U.S. the world's largest destination for FDI.
And the Obama administration wants to keep the United Statesas the world's premier destination for the ideas, the innovations, and, indeed, the capital of foreigners.
That's why the President's 2012 budget aims to make such significant investments in education, innovation, and infrastructure. We've got to maintain these building blocks of a vibrant economy to keep attracting foreign and domestic investors.
Because wherever you see foreign direct investment in American communities, you will see businesses and jobs being created and supported.
Foreign-owned companies employ some 5 million American workers across every single one of our 50 states.
And increasingly, we are seeing more investment coming in from China.
Commerce's Bureau of Economic Analysis reports that investors from China have a total stock of FDI in the United States of about $2.3 billion.
And the report being released today shows Chinese foreign direct investment to America doubling in each ofthe last two years. Chinese investors now have investments in at least 35 of our 50 states, across dozens of industries.
And the big question we're really getting at today is pretty straightforward: Is more Chinese FDI in America a good thing?
The answer is yes. It's a good thing for American workers. And it's a good thing for American businesses.
That is why today, there are few industries where the Chinese or other foreign investors are restricted from investing in America.
Unfortunately, that is not the case for American companies operating in China, where they are frequently shut out of entire industries, orthey are forced to give up proprietary information as a condition of operating in China.
This imbalance of opportunity is a major barrier to continued improvement of the United States and China's commercial relationship. And it is part of a broader trend of China recently narrowing its commercial environment after a long and fruitful period of opening.
Today, I want to talk about some of America's concerns and about how we can move past them to take our trading relationship to the next level.
China's turn towards economic openness over the past few decades is perhaps the chief reason why it has been able to bring hundreds ofmillions of people out of poverty and into a thriving middle class.
This openness extended to foreign direct investment in many industries where China saw growth potential, and it helped:
- Put Chinese people to work;
- Transfer tremendous know-how to Chinese companies; and
- Give those companies enormous capacity to become major manufacturers and major exporters.
China's policies have also provided opportunities for foreign investors to enjoy substantial profits from their China operations.
It has been a mutually beneficial relationship.
But we could be at a turning point in our economic partnership. A partnership defined less by China making and U.S. consumers taking and more by empowered Chinese consumers buying more goods and services from U.S companies. A partnership marked by Chinese and American innovators working side-by-side to develop breakthrough technologies.
Just look at what's happening with General Electric, which has formed a joint venture with China's Shenhua Energy Company to advance cleaner coal technology solutions for industrial chemicals, fuels, and power generation.
Or look at the agreement that was signed earlier this year to establish a U.S.-China Public-Private Partnership on Healthcare.
This partnership will draw its strength from U.S. and Chinese companies working together to help China achieve its goal of improving healthcare for its people, and it will open new export markets for U.S. companies that are world leaders in healthcare innovation.
These are but a few examples of our countries' best minds working together on breakthrough technologies that could open up hundreds ofbillions of dollars in new commercial opportunities in both China and the United States — opportunities that could create millions of good, middle-class jobs in both countries.
Unfortunately, for every success story, there remain far too many stories of American and other foreign companies being prevented from investing or operating freely in the Chinese marketplace.
In my travels across the U.S., I continue to hear stories of exasperation from American business leaders concerned about the commercial environment in China.
These concerns are shared by businesses around the world, and the most frequent complaints revolve around:
- Lax intellectual property protection;
- Lack of predictability and openness in government decision-making; and
- A series of policies that unfairly discriminate against foreign companies operating in China.
When it comes to market access problems for foreign companies, the issues may be different, but the fundamental problem often boils down to the distance between the promises of China's government andaction.
Perhaps an agreement is made in Beijing, but it never gets put into practice. Or perhaps there's a well-written law or regulation at the national level, but there's lax enforcement in the provinces or cities. Whatever the case, we don't often see enough real impact on the ground.
Let me just cite a few examples.
First, look at the issue of transparency, where U.S. companies find that laws and regulations are often developed or change unpredictably without notice or the opportunity for public input.
In 2008, China pledged to institute a 30-day public comment period for all proposed trade- and economic-related regulations.
But a recent US-China Business Council report found that, over the last year, less than 3 percent of proposed regulatory measures have been published as promised.
That's not close to good enough.