Two-way direct investment between U.S., China accelerating: report

The volume, patterns and industry details of foreign direct investment (FDI) flows between the United States and China have been accelerating in both directions in the past 25 years, according to a report released on Monday.

The report, launched by Rhodium Group and the National Committee on U.S.-China Relations, said that American companies have been active in the Chinese economy throughout the post-1979 reform period, while Chinese investors have begun to expand their U.S. presence as well in the past decade, turning the FDI relationship into a two-way street with multi-billion dollar flows every year.

"As this report reveals, both countries have been more welcoming to one another's investments than much official data would have us believe," Stephen Orlins, president of National Committee on U.S.-China Relations, said in a conference following the release.

According to the report, calculated by introducing a new transactions-based dataset method, American investments in China had a combined value of 228 billion U.S. dollars for the entire period of 1990 to 2015, while Chinese FDI in the U.S. amounted to 64 billion dollars in the same period, both are much higher than the official data showed.

The local benefits from FDI have been enormous. Chinese investment in the United States already accounts for over 100,000 jobs, while U.S. companies today employ more than 1.6 million workers in China, said the report.

Trade and investment between the United States and China -- the two largest economies in the world -- are critical aspects of U.S.-China bilateral ties and have improved the living standards of citizens on both sides and beyond, said Ker Gibbs, chairman of American Chamber of Commerce Shanghai, and Chen Xu, chairman of the China General Chamber of Commerce USA in a joint note.

The report also provided five general recommendations in light of the current U.S.-China policy agenda.

First, policymakers are well advised to consider how much further along the relationship is than official data suggests. Doing so argues for upgrading the policy framework presently used to manage related opportunities and concerns.

Second, in setting the bilateral agenda policy makers must be mindful of one another's internal timing. Current policy expectations have not only been set without a proper understanding of the data, but also without sufficient attention to domestic political processes and timing on each side.

Third, the data shows that the industry mix of two-way FDI flows has been evolving quickly, which naturally leads to worry about whether policy can keep up with national security issues. High-tech acquisitions will attract greater security scrutiny, and they are simply a bigger part of the mix nowadays.

Fourth, the comparative perspective on two-way FDI flow show that questions of symmetry and reciprocity in U.S.-China bilateral investment are complicated. China has traditionally hosted more investment from the U.S. than vice versa, but this had mostly to do with its stage of development and the readiness of Chinese firms to venture abroad.

Fifth and finally, the author of the report encourages Beijing and Washington to think beyond the bilateral.

"The U.S.-China FDI policy agenda does not exist in a vacuum. American and Chinese interests in maximizing the benefits of FDI cannot be guaranteed solely on a bilateral basis: the investment environment is inherently multilateral, and many of the policy issues extend beyond the bilateral U.S.-China dimension," said the report.

"Fundamentally different from trade, investment builds people-to-people relationships. Investment is like marriage: it requires sustained communication and commitment from both partners in order to thrive," said Orlins.

This report is more important than ever after last Tuesday' s presidency election, as it demonstrates how inextricably intertwined the United States and Chinese economies are and how import investment is, he added. Endi