Next Steps For U.S.-China Economic Cooperation

by Jocelyn Chan, Becky Fraser, July 20, 2012

This week, U.S. Chamber President and CEO Tom Donohue, joined by a delegation of American CEOs and former U.S. cabinet officials, traveled to Beijing to meet with Chinese business counterparts and state leaders to advance ongoing policy dialogues and launch new initiatives designed to strengthen U.S.-China ties.

In a meeting with Premier Wen Jiabo, Donohue underscored the need for a stronger and more enduring bilateral economic and commercial relationship, which is among the most important in the world. It’s a relationship with tremendous potential to expand our economies and enrich our peoples, but also one with implications that ripple beyond our shores and markets. The global economy is under intense pressure, and it is vital that the world’s two largest economies lead a recovery—not sharpen a downturn.

The overarching objective of the trip was to build on the momentum of bilateral cooperation and take concrete actions that will benefit both nations and make the entire global economy stronger. We made some important progress.

One of the highlights of the trip was the third meeting of the U.S.-China CEO and Former Senior Officials’ Dialogue, co-chaired by Donohue and former Chinese vice premier and China Center for International Economic Exchanges Chairman Zeng Peiyan. Another highlight was the inaugural U.S.-China Investment Cooperation Forum, a new initiative to increase two-way investment. Donohue and other Forum speakers met with Executive Vice Premier Li Keqiang, during which Donohue highlighted the mutual benefits of the U.S.-China relationship as well as the opportunities and challenges. In remarks to more than 400 potential Chinese investors attending the Forum, Donohue said the following:

Foreign direct investment has already led to greater economic growth, jobs, and opportunities in both of our countries. It has strengthened the friendship ties between our business communities.

American companies have been investing in China for over 30 years. We have contributed substantially to China’s rapid development. But institutional barriers are constricting opportunities for continued U.S. investment in China.

And while Chinese investment in the American market is growing at a rate of up to 200% a year, China’s investments in the United States are small given the size of the Chinese economy.

Of the $2.3 trillion in FDI in the United States, only 1 percent flows from China.

Removing obstacles to increased investment would be a boost to our bilateral relationship and a boon our economies.

A major impediment to Chinese investment in the United States comes down to a simple lack of understanding. The U.S. economic, political, and cultural environment is vastly different from what Chinese companies operate in domestically. The business climate is unfamiliar, and companies often overestimate the problems they’ll face.

By the same token, the United States must do a better job making Chinese companies aware of investment opportunities and show them how to seize those opportunities. To help that effort, at the Forum the Chamber unveiled Faces of Chinese Investment in the United States, a publication that highlights many Chinese companies that are already invested in the United States—and thriving.

During our trip, Donohue acknowledged China's progress in opening itself up to foreign investment over the last thirty years--even while expressing concern over its uneven policies that welcome investment in some areas while discouraging and prohibiting it in others. Of particular concern to U.S. businesses:

? Equity caps and licensing measures on foreign investment continue to restrict FDI in key sectors like banking, insurance, telecommunications, energy, agriculture, and autos.

? A broad new process for reviewing the national security implications of foreign investments gives Chinese firms broad leverage for objecting to foreign investment proposals.

? Policies that favor state-owned and state-supported enterprises remain in place.

? Troubling signals of industrial protectionism, despite China's stated commitment not to link government procurement to indigenous innovation.

? Market barriers, including making technology transfer and sharing a precondition for market access, remain an obstacle.

Though China and the United States face different sets of challenges, we must consider ways for the two to cooperatively grow their economies while helping restore stability in the global economy. Expanding the flow of foreign direct investment into one another’s markets is a good place to start.

That is why the U.S. and China should negotiate a high-standard bilateral investment treaty (BIT). Any future U.S.-China BIT should open both markets substantially to foreign investment, with only limited exceptions, and ensure that private and non-private companies are competing on a level playing field.

（This article was published on Free Enterprise on July 20, 2012）

http://www.freeenterprise.com/next-steps-us-china-economic-cooperation