China: The Next Major Investor in American Markets?

China: The Next Major Investor in American Markets?

09/29/14

James Krejsa

Economics, China, United States

"We should be ready to welcome Chinese investment as it grows to European levels, while remembering to review its origins from an enduringly statist system of politics."

American and Chinese negotiators are hard at work on a Bilateral Investment Treaty (BIT), the next step in closer, more productive relations between the world’s two largest economies. While U.S. negotiators have rightly focused on improving access for U.S. firms to Chinese markets, policy makers should not lose sight of the growing importance of Chinese investment here. Just a few years ago, Chinese foreign direct investment in the United States was measured in tens of millions of dollars, but that inbound capital has now progressed well into the billions, a trend expected to continue. Yet while foreign investment in the United States is almost always seen as an unambiguous good—shoring up domestic operations of existing businesses or spurring the creation of new jobs and capital—many view this new development with caution, if not outright suspicion.

When Toyota invested in Tesla’s advanced battery operations in 2010 and launched a joint-development deal 2011, it was seen as a critical validation for a company that is quickly becoming an iconic American brand. InBev’s acquisition of Anheuser-Busch bruised the patriotic pride of some, but there was little sense of social dread about a change in ownership. Investment from China, in contrast, is viewed with a more jaundiced eye. Smithfield Foods, an American meat-processing brand for more than seventy-five years, was recently purchased by Chinese agricultural giant Shuanghui Group. Few worry that Japan plans to derail American electric car technology or that Belgium is plotting to destroy the U.S. domestic bar and pub industry. Yet at a meeting of the Senate Committee on Agriculture, Senator Debbie Stabenow warned, “we need to evaluate how foreign purchases of our food supply will affect our economy broadly.” Is foreign investment from China really different and deserving of more scrutiny than investment from other countries?

Put simply, yes.

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