An American Open Door?
NEW YORK — Chinese direct investment into the United States has been increasing dramatically, with over $5 billion in 2010 alone. A Special Report undertaken by Asia Society’s Center on U.S.-China Relations and the Kissinger Institute on China and the United States at the Woodrow Wilson International Center for Scholars provides a comprehensive study of Chinese FDI in the United States and outlines its enormous potential to create economic growth. But it warns that the United States may squander immense opportunities for employment and investment gains through political fear-mongering.
The report was launched on May 4, 2011 with a keynote address by then Secretary of Commerce Gary Locke.
The authors of the report, Daniel H. Rosen and Thilo Hanemann of The Rhodium Group, estimate that Chinese firms in the United States have already created more than 10,000 American jobs. But despite an overall effective U.S. screening policy for inward investment, political interference threatens to divert legitimate and potentially beneficial investment deals.
Surging Chinese investment has triggered populist anxieties in the United States, just as Americans once feared economic domination by Japan. "Japanese investment in the United States during the 1980s was as controversial as China's,” the authors say, “but in the following years, U.S. affiliates of Japanese companies invested hundreds of billions of dollars in the United States, and today employ nearly 700,000 Americans.”
Watch a trailer for the report:
The report endorses continued careful screening for national security threats but argues the procedures are in place to filter them out. The authors conclude “We believe the great bulk of potential Chinese investment should not just be permitted but encouraged.”
In a series of policy recommendations, the authors outline U.S. actions to maximize benefits and call on leaders in Beijing to do their part to ensure success: “If China wants a more straightforward hearing for its firms in Washington, it must improve corporate governance at home.”
Among the study’s policy recommendations for the U.S.:
- Promotion of FDI from China needs to be taken seriously at the federal level to encourage and attract the right kinds of investment;
- The CFIUS process of screening investments for U.S. national security concerns should be better protected from political interference;
- The U.S. should refrain from playing the reciprocity game and making access to the U.S. contingent on Chinese market openness.
The study outlines recommendations for China as well:
- The introduction of a consumer-oriented welfare test would help ensure that market performance, not political objectives, drive corporate behavior;
- Enhanced corporate transparency, particularly with respect to ownership and control structures, would streamline investment reviews;
- Clearer separation between Chinese regulators and the firms they oversee would mollify worries that Chinese investments are simply political entities.
“These investments are going to happen somewhere,” says Asia Society’s Orville Schell. “The question is: will our doors be open to them? Will they happen here?”
In October 2012, Asia Society published a follow-up report entitled Chinese Direct Investment in California that examines Chinese investment at the state-level in California, offering recommendations for policy and business leaders to increase California’s competitiveness in attracting foreign investment.
English press coverage of the report:
As China Invests, U.S. Could Lose [The New York Times]
China’s Investment Curbs Prompt U.S. Frustration, Locke Says [Bloomberg]
Chinese investors still searching for U.S. welcome mat [CNN]
U.S. Warns China Is Closing Up Again [The Wall Street Journal]
Report urges U.S. open door to China investment flood [Reuters]
Chinese offshore investment set for take-off [Financial Times]
Help China Invest More in USA, Report Says [Forbes]
Schell Interview About China Investment in U.S. (Video) [Bloomberg]
Chinese press coverage of the report:
投资美国－为中国未来十年上万亿美元资本输出指路 (PDF) [财新网 Caixin Media]
美报告建议美应欢迎中国对美直接投资 [新华网 xinhuanet.com]
投资美国－为中国未来十年上万亿美元资本输出指路 [新浪 sina.com]
美应为中国投资拆除“三重门” [人民日报海外版 people.com.cn]
中国在美直接投资不会是坦途 [中国证券报 cs.com.cn]
中国海外投资加速 美方欲分一杯羹 [财经 Caijing Magazine]
Senator Feinstein's remarks on the report
Senator Dianne Feinstein's greeting to the the audience at the Asia Society West Coast briefing on a new report, "An American Open Door? Maximizing the Benefits of Chinese Foreign Direct Investment" in Menlo Park May 13, 2011.
This project was made possible by a generous gift from Harold and Ruth Newman.
Thanks to our communications partner, Ogilvy China Practice.