US president Trump and Jack Ma of Alibaba met this January in New York. Photo: BBC
The Trump government’s latest call for a "reciprocal" investment demanding China to open up more sectors to foreign investments may not be feasible and won’t have a concrete impact on China’s investment in the US, said a government researcher in a recent interview with Sino-US.com.
“It is not feasible to demand the same level of openning up between China and the US, as the two countries are at different development phases and (have different) systems,” said Zhou Mi, deputy director of the Institute of America and Oceania Study under the Ministry of Commerce.
China’s investments in the US surged 359% annually to $53.9 billion in 2016 from the $11.7 billion in the previous year, according to Mergermarket, but there are wide concerns that the investment may lose momentum in the coming year given Trump’s call for a stricter scrutiny on foreign purchases, particularly those from China, of US businesses.
According to an earlier CNN report, a Trump transition team has drafted a memorandum outlining the new president’s trade policy for the first 200 days of his presidency, and indicated that he would empower the Committee on Foreign Investment in the United States (CFIUS) to review more sectors including food security and reciprocity in the treatment of foreign investment in the US. If implemented, the policy would dampen Chinese buying attempts in the coming years.
The CIFUS is an inter-agency committee of the United States Government that reviews the national security implications of foreign investments in U.S. companies or operations. Companies proposing to be involved in an acquisition by a foreign firm are supposed to voluntarily notify CFIUS, but CFIUS can review transactions that are not voluntarily submitted.
The US-China Economic Security Review Commission, in an annual report to the Congress last November, also recommended that the US ban Chinese state-owned enterprises from buying US companies. The report recommended the US Congress to prohibit U.S. acquisitions by Chinese state-owned companies through authorizing CFIUS more power.
“We would not respond to those proposals …that have not gained concensus,” said Zhou, whose agency mainly instruct, serve and help register China’s foreign merger and acquisition bids.
The review processes of the CFIUS was codified by the US Congress and implemented by the government. Fundamental changes of the CFIUS would need congressional approval while executive orders alone could hardly cause any immediate effect, said Zhou, adding that China and the US have been engaged in the Bilateral Investment Treaty (BIT) talks, negotiating on opening up each other’s economic sectors.
Meanwhile, if the US readjuted CFIUS’ practices or go against the most favored nations clauses to take discriminative actions, it would break its current international committements, Zhou said, adding it is in both parties’ interest to avoid a trade war or protectionist conflicts this year while the global economy is still recovering.
When China started up its “going global” strategy, the US was not regarded as its most important investment destination. However, in recent years, with more and more Chinese enterprises diversifying their operations, the US is becoming increasingly important for China.
“(So) if one door is closed, the companies, entities of global market, would choose other paths suitable to their development,” Zhou said, adding countries taking part in the “One Belt, One Road” have been keen on attracting foreign investments and have proactively mapped out various measures to protect the interests of investors.
What’s more, “the US also needs foreign direct investment to give impetus to its own economy and create new jobs, and investments from China have been playing a big role,” Zhou said.
Zhou Mi (周密) is the Deputy director of the Institute of American and Oceanian Study, Chinese Academy of International and Economic Cooperation, Ministry of Commerce.