U.S. Chamber Report Finds Major Shift in Flow of U.S.-China Investment

Tuesday, April 29, 2014 - 10:30am

Chinese Annual FDI in the U.S. Now Exceeds U.S. FDI in ChinaChinese Annual FDI in the U.S. Now Exceeds U.S. FDI in China

A U.S. Chamber report released today finds that Chinese annual foreign direct investment (FDI) in the U.S. now exceeds FDI by U.S. companies into China by most measures, including China’s own official government statistics. The report, “New Realities in the US-China Investment Relationship,” authored by Daniel H. Rosen and Thilo Hanemann of Rhodium Group, highlights the benefits these investments offer Americans, including job creation and a more competitive consumer market. It also underscores the need for continued U.S. leadership in support of an open investment regime and timely Chinese investment liberalization to keep pace with changing trends.

“Chinese companies have only been in the U.S. market a short time, but we’re seeing exponential growth, along with real benefits for American consumers and the broader economy,” said Jeremie Waterman, the Chamber’s executive director for Greater China. “The U.S. Chamber supports Chinese investment in the U.S. economy, and we look forward to seeing more. At the same time, this reversal of investment flows means China needs to accelerate investment liberalization at home, both to support its own economic reform goals and avoid unnecessary friction in the bilateral economic relationship.”

The report offers recommendations for leaders in both the U.S. and China. Rhodium and the Chamber advise joint acknowledgement by both governments of the changed pattern in two-way FDI flows to overcome existing biases, recognition of and preparation for potential threats to two-way investment growth. They also underscored the importance of bold action by the Chinese to liberalize investment restrictions, including an early harvest of investment opening by China in important sectors this year to sustain and promote continued investment deepening, and a dramatic reduction in China’s draft negative list as a first offer in the Bilateral Investment Treaty (BIT) negotiations to boost prospects for an agreement.

“While this is all good news, this new reality means that the Chinese government must not only continue to reform its outbound investment regulations, but also redouble its efforts to keep pace with more liberal countries like the United States on domestic regulation of FDI,” said Sean Heather, vice president of the Chamber’s Center for Global Regulatory Cooperation. “As the BIT negotiations accelerate, U.S. policymakers will need to ensure that any market access gains on paper are matched in the negotiations with progress in related areas such as disciplines on state-owned enterprises, coerced localization of intellectual property, a narrowing of China’s national security review criteria, and dramatically increased transparency of investment reviews, including under the Anti-Monopoly Law. Significant progress in these areas would help to ensure that the market access that is promised is realized in practice.”

A copy of the full report is available here.

International trade and investment is a key component of the Chamber’s 2014 Jobs, Growth and Opportunity Agenda, an ambitious plan to generate stronger economic growth, create jobs, and expand opportunity for all Americans.

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. Its International Affairs division includes more than 50 regional and policy experts and 25 country- and region-specific business councils and initiatives. The U.S. Chamber also works closely with 116 American Chambers of Commerce abroad.