"As the Chinese economy expands and becomes further integrated into the global economy, Chinese FDI will naturally increase," says Brenda Foster, president of the AmCham Shanghai. "Like other foreign investment in the United States, Chinese investment will create American jobs, promote growth and increase U.S. exports."
At the launch of AmCham Shanghai's Chinese FDI in the US on June 24 at the Four Seasons Hotel Shanghai, Bob Theleen, CEO and Chairman of ChinaVest said, "We expect Chinese outbound investment in the U.S. to continue to increase. While investments may be relatively small in scale they will be diverse with a focus on resources, clean energy, technology, agribusiness and biotechnology."
Win-win outcomes
Chinese investment in the U.S. is being encouraged at the local level as U.S. states and cities emerge from the economic downturn. Tasked to attract Chinese investment to their home state, China hosts more U.S. state trade offices than any other country; more than 30 were registered in 2010.
Chinese FDI has the potential to result in "win-win" outcomes for both Chinese companies and American communities. State trade offices estimate that for every US$500,000 in investment, ten new American jobs are directly or indirectly created.
In 1998, Wanxiang America Corporation, a subsidiary of Wanxiang Group Corporation located in China's Zhejiang Province, established a joint venture partnership with troubled U.S. axle manufacturer Driveline Systems LLC which preserved at least 50 on-site jobs and returned the company to profitability. In 2001, Wanxiang America acquired a 21 percent stake in distressed U.S. brake manufacturer Universal Automotive Industries Inc. for US$2.8 million.
In March 2009, the State of Illinois announced it was offering a US$2 million business investment package to Wanxiang America to build a solar-panel assembly plant and manufacturing facility in Rockford, Illinois. Initially, the deal is expected to create at least 60 new jobs that will eventually increase to more than 200. The Illinois economy will receive a US$12.5 million boost representing Wanxiang America's total investment. Now one of the largest automotive parts manufacturers in China, Wanxiang America currently employs more than 4,100 people in the U.S. alone.
Recommendations to Leverage Chinese Investment in the United States
Although sensitivities exist with respect to foreign investment in America's most strategic sectors, overall, Chinese investment is good for both the American and Chinese economies and for the state of the U.S.-China commercial relationship.
AmCham Shanghai and the AmCham Shanghai Financial Services Committee have developed the following recommendations that federal, state and local governments and their corporate constituents can take to invite, prepare for and capture a greater share of Chinese FDI:
- Support U.S.-China bilateral investment treaty (BIT) talks. BITs are regarded as crucial to boosting confidence in cross-border investments and have the potential to increase trade volume, especially during the signing and implementation stages.
- Make efforts to depoliticize the U.S. regulatory process in which the Committee of Foreign Investment to the United States (CFIUS) identifies foreign investment deals chosen for review. Chinese investors are increasingly concerned that its investments may be hampered by U.S. national security restrictions and may serve to drive much needed investment to Canada, Mexico and other countries.
- Balance and negotiate stakeholder involvement in investment deals to develop "win-win" outcomes for Chinese investors and U.S. companies and the local community.
- Bridge the gap between different cultural business practices. Hire Chinese-proficient staff at relevant governmental and quasi-governmental bodies to guide investments through the right channels. Understand who the investors are, the concerns of the community and how to bridge the business gap.
