Ongoing US-China Talks Add to Interest in Report on Chinese Direct Investment

Cover of China's Century Weekly magazine for the week of May 17, 2011.

With the Strategic and Economic Dialogue (S&ED) between China and the U.S. going on in Washington these past few days, much has been said in the press about the myriad issues about which the two countries are at odds. However, last week Asia Society's Center on U.S.-China Relations and the Kissinger Institute on China and the United States jointly released An American Open Door? Maximizing the Benefits of Chinese Foreign Direct Investment, which garnered attention from the policy community and media, as it finds a potentially collaborative space within this increasingly complex bilateral relationship.

On the eve of the report launch, New York Times Shanghai correspondent David Barboza wrote, "… many analysts say China and the United States clearly need each other. China now has the capital American business so desperately seeks, and the United States has technology and a highly skilled work force." Speaking about the role of Chinese foreign direct investment in the United States, Orville Schell, Director of the Center on U.S.-China Relations, said, "… this is one key way to get the US and China into a closer and more collaborative working relationship, which can only help in all the other areas in which where we must find ways to get along."

The report finds that while America's investment screening process, CFIUS (Committee on Foreign Investment in the United States), is quite sound and effective, the political noise that surrounds the process can often impede direct investment from China. China's interest in higher return investments in advanced economies is steadily growing, but many potential investors in China are unaware the U.S. is open to such investment as the political interference has thus far been louder than the positive numbers this report elucidates.

Caixin Media's Century Weekly magazine featured the report on its cover in China (condensed English language article here), and interviewed report author, Rhodium Group's Dan Rosen, about the CFIUS screening process. Rosen explains that the narrative has been distorted by a few large failed deals, and in actuality, "In each of the past two years Chinese direct investment [in the U.S.] has increased by 130 percent, more than doubling every year right now, so actually there are lots and lots of deals that go through all the time and are not problematic at all."

The United States was built on openness to foreign investment, but the complicated nature of the U.S.-China relationship has clouded that commitment. This report shows Chinese direct investment in the U.S. is in fact growing steadily.

In an interview with Bloomberg News, Orville Schell stated the opportunity for America concisely: "They have the money. We need the investment. It could create jobs, help rebuild infrastructure and I think it is in the American interest." An American Open Door? poses the question, is this an opportunity the United States is willing to risk missing out on?

Related coverage

China's spending spree deserves three cheers [Financial Times

America Gains From Chinese Investment [Wall Street Journal]

Report urges U.S. open door to China investment flood [Reuters]

Chinese investors still searching for U.S. welcome mat [CNN]

US to see rapid rise in ODI from China [China Daily]

China on the Verge of a Worldwide Foreign Investment Boom, Says Report [Forbes