Irshad Salim — Record high Chinese investment in the United States in 2016 demonstrates Beijing’s global economic agenda underlying its efforts to close trade deficits with nations across the Pacific and the Atlantic.
A report co-authored by the Rhodium Group and the National Committee on U.S.-China Relations shows Chinese companies invested 46 billion dollars in the United States last year — a gigantic figure, tripling the amount seen in 2015, sending two-way direct investment to a record high amid reports that the Trump administration desires re-calibration and course-correction in US-China trade.
The report characterizes past two-way investment as a “one-way street,” with money flowing predominantly from the United States to China. But now, investment is a “two-way highway” with tens of billions of dollars in annual FDI flowing in each direction, the Chinese state media outlet Xinhua commented.
While the U.S. administration worry Chinese manufacturing could threaten U.S. jobs and its economy, “Chinese companies are bolstering the U.S. economy by creating jobs and paying taxes,” claims the commentary.
“In the last seven years, employment by Chinese-owned firms in the United States had jumped nine-fold to 140,000 jobs last year. By the end of 2016, all 50 states and 98 percent of congressional districts hosted operations of Chinese companies,” it said.
According to official reports, China-US trade deficit grew to a whopping $347 billion in 2016, invoking comments from Trump — America’s first CEO-president, that the gap ought to be addressed. Following his meeting with the U.S. President in Florida, Chinese President Xi on his stopover in Alaska talked trade and commerce, including investment in oil, gas and the LNG pipeline project.
According to John Ling, president of the Council of American States in China, more and more U.S. states are increasing recruitment efforts to help land the next Chinese manufacturing project. He believes this will “give more leg” to a healthier bilateral economic relationship.
There is, however, huge room for expanding the footprint of Chinese investors in the United States beyond real estate and energy – key sectors China has been focusing on for years.
China is transitioning away from an export-driven economy to one led by consumer spending and services. Therefore, Chinese investors and state-owned companies have begun to shift their target industries in the US away from traditional energy and real estate industries to consumer services and the high-tech sector. These are employment-intensive from American jobs point of view.
According to the joint report, more than 90 percent of Chinese FDI in the United States in 2016 focused on services and advanced manufacturing.
Chinese drugmaker Qilu Pharmaceutical offers the latest example, the commentary said. The firm has reportedly invested over 40 million U.S. dollars to open an innovation hub and expand its business presence in Boston — the pharmaceutical innovation hub in the US.
Boston enjoys the reputation as a global champion of life science research and development. China seeks to make inroads in the value chain.
Qilu aims to capitalize on Boston’s rich R&D resources to upgrade its product mix, and looks toward turning state-of-the-art ideas into reality in the world’s largest consumer market.
The great rebalancing of the Chinese economy offers a historic chance to expand Chinese investment in the US — even in next door Canada and Asia, its front yard — its ambitious One Belt One Road concept rekindles the centuries-old Silk Route. This time cranes and construction crews are replacing caravans and camels.
With OBOR in mind, China understands the great potential behind building a constructive U.S.-China relations in the 21st century. It has invited America to participate in OBOR and the Asia Infrastructure Investment Bank (AIIB). While Canada recently joined AIIB, the US and Japan are still reviewing the matter.
The US has been leading global economy, however, China will soon surpass the super power and take the berth of numero uno of global economy for the first time in modern history– it has already surpassed India.
China’s southern neighbor is second biggest stakeholder in China-led AIIB but remains unparticipative in OBOR for varying reasons.
China tried to assuage the concerns by holding OBOR Summit this month, saying it’s is all about geoeconomics, not geopolitics, as it’s skewed in favor of the the wellbeing and welfare of emerging nations of Asia, Africa, Middle East and beyond — not just China-centric.
The U.S. — biggest purchaser of goods and services from China, seeks to narrow the trade deficit notwithstanding AIIB and OBOR invite for participation. And it’s understandable. We have CEO-President Trump now in the White House who believes in ‘America First’ using economic-diplomacy – his core strength. And it’s yielding results like it or not, putting many on the defensive on the negotiating table –including China.