Published May 05, 2011
Chinese companies have mountains of money ready to invest in the world.
At the moment, much of that money is going to resource-rich countries in Africa in need of investment to improve their infrastructure.
But according to a report released Wednesday, the latest U.S. statistics for 2009 show only $2.3 billion in Chinese direct investments in firms with operations in the United States.
That figure hardly registers when you consider that there is more than $2 trillion in foreign direct investments into the country at any time.
The report for the Asia Society, the Kissinger Institute on China and the United States, and the Woodrow Wilson International Center for Scholars doesn’t pull its punches in its conclusions of what needs to be done.
It suggests letting the Chinese money pour in.
The study suggests that Chinese companies could be investing as much as $1 trillion to $2 trillion around the world by 2020.
“If just 5 percent of China's expected outflows target the United States over the coming decade, the numbers will be enormous," according to the report's authors, economists Daniel Rosen and Thilo Hanemann.
And that, they suggest, could translate into hundreds of thousands of new jobs in the States. Still, there is a problem with that scenario, a problem the report acknowledges.
Would such investment really be welcomed, or will politicians throw up barriers to it? Recent history suggests that could easily happen.
The report raises the case of Chinese oil company CNOOC's unsuccessful attempt to acquire Unocal in 2005.
It suggests political opposition to the deal such as this in the U.S. has made many Chinese companies wary of investing.
Rosen and Hanemann argue U.S. officials are often too suspicious.
"Therefore, they suspect that if a Chinese firm is coming to America, it must be for some political purpose rather than simply to make money. This conclusion is wrong, and if we are to maximize U.S. interests, such misapprehensions must be corrected," they said.
There are, of course, many “misapprehensions” about China.
But Beijing doesn’t, of course, have the best track record to fall back on in terms of its behavior, perceived or otherwise, by the U.S.
Reports of industrial espionage and copyright infringement are commonplace, painting a picture of a China that doesn’t play by the rules, and if anything wants to undermine the economic clout of the U.S.
China has got a lot to do to erase that concern and build trust.
The report acknowledges that and suggests the U.S. should carefully look at each Chinese investment in terms of national security concerns, but they should be “shielded” from political interference.
And it urges U.S. officials to show more flexibility in negotiations with, for instance, not trying to link them to reciprocal deals in China.
Otherwise, it warns jobs will likely go to America’s NAFTA neighbors.
"For 30 years, China has grown stronger by opening its door wider to FDI, irrespective of overseas openness. The United States should do the same, or risk Chinese firms setting up plants in Ontario instead of Michigan, or Juarez instead of El Paso," the report said.
The U.S. has faced the same scenario with Japan back in the 1980s, when their companies seemed to be buying up everything.
Those same Japanese companies now employ an estimated 700,000 Americans and are an important part of the economy.
U.S. and Chinese officials meet next week in Washington.
The report urges the U.S. Congress and the White House to roll out the welcome mat for their Chinese visitors….because jobs are at stake.