Why Chinese Investment In The U.S. Can Still Be A Good Thing

Florida’s House of Representatives this week moved to finalize a law to limit mainland Chinese real estate purchases in the state, adding to efforts by Texas and others to restrict investment amid intensifying geopolitical competition between the U.S. and China. Given the overall tension, is accepting Chinese investment a bad idea or a potential help to America’s own economy?

American business and government leaders attending a meeting organized by the China General Chamber of Commerce in Washington, D.C. on Monday offered qualified support for the economic benefits that investment can bring. “We should welcome Chinese investment in the United States,” as long as it is regulated and especially when it replaces Chinese imports, said conference speaker Craig Allen, president of the U.S.-China Business Council, a Washington-headquartered organization that represents more than 280 America-based multinational companies.

“The U.S. affiliates of Chinese companies play an important role in adding investments and jobs to our economy,” said Frederick Helfrich, commercial officer at SelectUSA. SelectUSA is a program under the U.S. Department of Commerce that aims to attract to investment to the U.S. from foreign countries.

The China General Chamber of Commerce-USA, a group that represents mainland Chinese companies in the U.S., organized the gathering as a “SelectUSA Reception” on the eve of the SelectUSA Investment Summit, an annual four-day event organized by the U.S. Department of Commerce in Washington this week that attracted a record 4,000 attendees either promoting or exploring investments in America. Some 100 businesses from China attended, including about 50 newcomers that flew over from the mainland.

Among other U.S. officials on hand at the China General Chamber event on Monday, Diane Farrell, Deputy Under Secretary for International Trade in the Commerce Department, also noted the pluses of mainland investment to the U.S. economy. “As our investment summit begins, I’m reminded of the contributions Chinese companies have made to growth and job creation in the U.S. economy,” Farrell said. “Such investments have deepened business relationships between our two countries, and they offer opportunities that benefit both of our countries.” Chinese companies have to date invested $53 billion in U.S. facilities, she noted. Though less than half of the amount of U.S. investment in China, it has created more than 119,000 direct jobs.

The group gathered against a backdrop of U.S.-China tension over Beijing’s close ties with Russia, its suspected sending of a spy balloon over militarily sensitive parts of the U.S. this year, differences over Taiwan, worries about data security for American users of China’s popular TikTok platform, and reported raids on American companies doing business in the country, among other issues. The costs of a decoupling between the two sides, however, could be high. An IMF report earlier this year estimated that even with limited global decoupling, global GDP could shrink as much as 7%. In the U.S., economists have suggested a possible recession this year without any new major disruptions between Washington and Beijing.

More Chinese investment, particularly if it replaces goods otherwise exported from China, “should be warmly welcomed by mayors and governors across the United States,” Allen said. “We should not decouple. We should trade with each other. We should invest with each other,” while taking care of U.S. national security needs, he noted.

Investment by other foreign trading partners, Allen said, has helped reduce U.S. trade deficits and friction. “When you look at U.S. history — maybe the history of any country — you find that oftentimes there’s a large trade deficit (and) that deficit is corrected by internal foreign direct investment.”

“In the 1970s, there was quite a bit of tension with Japan because of a bilateral trade deficit” that has been eased with the help of its investments in the U.S., as has trade pressure between the U.S. and South Korea, Allen said. “Foreign direct investment is economically the rationale way to address a trade deficit,” he said. Addressing the D.C. audience, Allen said: “We welcome you to put down roots. We welcome you to hire Americans. We welcome you to contribute to our tax base. We welcome you to contribute brands and know-how and technology in our country, just as American companies have done in China.”

A survey released on Monday by the chamber found continued Chinese interest in investing in the U.S. despite current bilateral tensions. Some 94% of Chinese businesses said they expected to either increase their fixed investment in the U.S. or leave it unchanged this year from 2022. “The primary motivations for Chinese companies to establish a U.S. presence are two-fold: the vast size of the market, and its leading business mindset,” the survey report said. (See related post here.)

Also addressing Chinese companies in the audience, China’s own top-ranking official in the U.S. also spoke favorably on Monday about the U.S. market and SelectUSA. “Chinese enterprises present today could use this platform to gather investment information, find resources and learn about local markets, tax policies and legal systems,” said Xueyuan Xu, Chargé d’Affaires, Deputy Chief of Mission and Minister at the Embassy of the People’s Republic of China.

“The U.S. remains the world’s largest consumer market, the most advanced financial system and a global highland for the creative minds,” she said. “To the Chinese businesspeople: we hope you will demonstrate entrepreneurship, forge ahead, and work with local companies to jointly explore the market, fully prepared to abide by laws and regulations, respect local culture, better serve local economic and social development, and make greater contributions to China-US cooperation and world economic recovery.”

The next six months in U.S.-China relations will be important because of the possibility that U.S. President Joe Biden and China President Xi Jinping can meet in person at an APEC meeting scheduled to be held San Francisco in November; many in both countries will be looking to build bridges between the two ahead of it, Allen predicted. “The next six months will be important in the bridge repair business,” he joked.

Pin Ni, president of Illinois-headquartered Wanxiang America Corp., an affiliate of Hangzhou-based Wanxiang Group, also lightheartedly noted U.S. opinion polls that show widespread negative feelings among American public opinion toward China. (See related post here.)

“Twenty years ago, we were here probably more like a panda. Everybody liked us, (we were) cute, lovely and representing another part of the world. But today, I don’t know what’s the best term to use — maybe skunk,” he said to chuckles. “Clearly, we’re a minority. But that’s okay. I think eventually, history will tell we were right. What we’re doing here is not only good for us, but also good for our next generation, for these two countries, and also for this world,” said Ni, whose U.S. business has operations in 24 states, approximately $4 billion in annual revenue, and employs 8,000. “That’s why we’re here together. We’re going to be stay together and try to solve those issues together.”

To that end, he advised attendees to build local bonds in communities where they do business. “Where we belong to is the community. Maybe at the federal level we’re viewed differently, but as long as we stay with the community, we connect with community (and) we invest in the community, (then) I think that’s our own community and it’s not about the U.S.-China (relationship). It’s all about human nature,” Ni said. “It’s our own community.”

See related posts:

Strained U.S.-China Relations Are Worrying Businesses From Both Countries

Washington Will Impose New Restrictions On U.S. Businesses In China, Legal Expert Says

Alibaba’s Jack Ma Returns To Public Life At Four Universities Outside of Mainland China

@rflannerychina