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Should America Be Afraid of Chinese Investment?




US Secretary of Commerce Gary Locke, shown here in Washington, DC in Jan. 2011, delivers the keynote at Asia Society's report launch in DC on May 4, 2011. (Karen Bleier/AFP/Getty Images)

US Secretary of Commerce Gary Locke, shown here in Washington, DC in Jan. 2011, delivers the keynote at Asia Society's report launch in DC on May 4, 2011. (Karen Bleier/AFP/Getty Images)

Is the US prepared for direct investment from China? Does Chinese investment pose a unique threat to US national security due to China's sheer size and level of state-intervention? How should the US screen these investments?  And lastly, what can the US gain from Chinese direct investment?

The coming decade will bring an unprecedented amount of Chinese capital seeking direct investment opportunities abroad: over $1 trillion by 2020, a significant share of which may be destined for the United States. A new report being released on May 4, 2011 by Asia Society's Center on U.S.-China Relations and the Woodrow Wilson International Center for Scholars, An American Open Door? Maximizing the Benefits of Chinese Foreign Direct Investment, provides the most comprehensive study to date of Chinese FDI in the United States and outlines its enormous potential to create economic growth. But it warns that the United States may squander immense opportunities for employment and investment gains through political fear-mongering.

Featuring a keynote address by Secretary of Commerce (and next US Ambassador to China) Gary Locke, the press launch for An American Open Door? will be webcast live on AsiaSociety.org/Live at 9:30 am ET on May 4.

The report's authors, Daniel Rosen and Thilo Hanemann of Rhodium Group, analyze the data and motives behind Chinese direct investment in the US and disentangle US investment policies from politicking in the face of this rapidly growing source of investment.    

As with Japan in the 1980s, Chinese investment has triggered populist anxieties in the US, and several high-profile deals have invited accusations of protectionism (CNOOC-Unocal, Anshan). Politicization of Chinese deals — even the fear of — can spook investors and divert this investment elsewhere. But what are the real issues behind fears of Chinese direct investment? What are legitimate national security threats and what is simply political fearmongering?  

What many Americans don't realize is that Chinese investment is already arriving into the US in a major way — $5 billion in 2010 alone. While this number is still low compared to direct investment from Europe and Japan, it is rising fast and more than doubling annually.  

In fact, it is estimated that by 2020 more than $1 trillion in Chinese capital will be seeking out direct investment opportunities abroad. Whether the US becomes a major recipient of this investment remains to be seen.  

Since the days of controversy over investment from Japan, Japanese companies have invested hundreds of billions of dollars in the US economy and employ nearly 700,000 Americans today. Should America keep the door open to Chinese investment in the hopes of bringing similar benefits to the its economy?