Page 24 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
countries have failed to materialize since talks began the founding partner of the Rhodium Group, said the
in 2008. As Chinese businesses are taking advantage of restrictions on investment in the U.S. had created a
investment opportunities in the US, it could potentially debate about how open the United States was to foreign
offer Washington new leverage with China to open up business and it could refresh tensions with China.
its domestic markets to foreign access (Tang). “If one Beijing’s strict capital controls from the end of 2016
country’s products are subsidized and protected in other were expected to drag down China’s U.S. investment
ways to make them more competitive internationally, to $25 billion to $30 billion in 2017. Real estate and
is that really free trade?” said William Zarit, chairman entertainment deals, which have been labeled by the
of the American Chamber of Commerce in China. “The Chinese authorities as “irrational investment”, accounted
U.S. is so open to Chinese exports and now increasingly for 37.6 percent and 10.2 percent of the 2016’s total.
Chinese investment. And the reverse is not the case,” Nevertheless, Rosen believes China’s total outbound
he told CNN. Zarit highlighted Beijing’s support for the investment in the U.S. will bounce back and eventually
country’s huge state-owned enterprises and protection more than double to reach $2.5 trillion by 2025. Equal
of key industries like advanced technology and access to each other’s markets is a key barrier to agreeing
renewable energy. “Protecting those industries makes it an investment treaty. Both countries have conducted
more difficult for our companies to do business in those dozens of rounds of talks on the issue, but these have
sectors,” he said. “That’s one of the things we see as not largely stalled since Trump was sworn into office (Tang).
fair” (Mullen and Rivers).
Experts said that while the policy changes looked
Kenneth Jarrett, a former senior diplomat and the promising on paper, they lacked detail and would depend
president of the American Chamber of Commerce on how effectively they were implemented. Although
in Shanghai, said equal access to markets would be Zarit is critical of how some things work in China, he’s
leverage to address some of the issues in China: “Now wary of the kind of confrontational approach to trade
suddenly you have so much Chinese investment that Donald Trump has talked about. The president-elect
going into the United States, [which] does provide an has threatened to slap tariffs of as much as 45 percent on
opportunity. It also has a symmetry because you can use Chinese goods, a move experts warn would set off a cycle
it as a point to put pressure on the Chinese government of retaliation. “Treatment of American companies in China
to ease up at this end.” China registered record high has been deteriorating,” he said. “And a trade skirmish, or
outbound investment of $170 billion in 2016 (Tang). a trade war, could possibly see the treatment of American
There are so many cash-flush investors in China that companies deteriorate even further” (Mullen and Rivers).
there are fewer good opportunities to buy companies, According to AmCham China’s 2017 China Business
and so people with money have fewer places to put it, Climate Survey Report of its members, 81 percent of
said Eswar Prasad, a professor of trade policy at Cornell. responding members said they felt foreign businesses are
Such investors might have once put their money into U.S. less welcome in China. That’s up from 77 percent a year
securities, but the rate of return is low, so they’re turning earlier. Furthermore, labor expenses are rising in China.
their attention to buying foreign companies instead. “The According to the same report, American businesses in
U.S. is seeing the same pattern of increasing Chinese China cite rising labor costs as their top problem. That’s in
investment that is taking place worldwide,” Rosen said. part because worker organizations are gaining strength,
Often, investors buy existing companies overseas simply and strikes and labor disputes are becoming more
as an investment. The Chinese manufacturer Haier common. Today, Chinese manufacturing wages adjusted
bought General Electric’s appliance division in 2016, for for productivity are $12.47 an hour, compared to $22.32
instance, and a consortium of Chinese investors bought in the United States, according to the Boston Consulting
the printer company Lexmark (Semuels). Group (AmCham and Bain). Wages aren’t the only costs in
China that are rising. The price of electricity has increased
Ninety-seven percent of Chinese investment in the 15 percent since 2010, and industrial land is becoming
U.S. was made through acquisitions, which makes it more expensive too. These factors alone would be enough
vulnerable to national security reviews by the Committee reason to give American companies pause about locating
on Foreign Investment in the U.S.. The reviews led to factories in China, and these are other reasons Chinese
lower investment in the politically sensitive information, businessmen are looking outside of their own country for
communication and technology sector of $3.2 billion in investment opportunities.
2016 compared with $5.8 billion in 2014. Daniel Rosen,
24
countries have failed to materialize since talks began the founding partner of the Rhodium Group, said the
in 2008. As Chinese businesses are taking advantage of restrictions on investment in the U.S. had created a
investment opportunities in the US, it could potentially debate about how open the United States was to foreign
offer Washington new leverage with China to open up business and it could refresh tensions with China.
its domestic markets to foreign access (Tang). “If one Beijing’s strict capital controls from the end of 2016
country’s products are subsidized and protected in other were expected to drag down China’s U.S. investment
ways to make them more competitive internationally, to $25 billion to $30 billion in 2017. Real estate and
is that really free trade?” said William Zarit, chairman entertainment deals, which have been labeled by the
of the American Chamber of Commerce in China. “The Chinese authorities as “irrational investment”, accounted
U.S. is so open to Chinese exports and now increasingly for 37.6 percent and 10.2 percent of the 2016’s total.
Chinese investment. And the reverse is not the case,” Nevertheless, Rosen believes China’s total outbound
he told CNN. Zarit highlighted Beijing’s support for the investment in the U.S. will bounce back and eventually
country’s huge state-owned enterprises and protection more than double to reach $2.5 trillion by 2025. Equal
of key industries like advanced technology and access to each other’s markets is a key barrier to agreeing
renewable energy. “Protecting those industries makes it an investment treaty. Both countries have conducted
more difficult for our companies to do business in those dozens of rounds of talks on the issue, but these have
sectors,” he said. “That’s one of the things we see as not largely stalled since Trump was sworn into office (Tang).
fair” (Mullen and Rivers).
Experts said that while the policy changes looked
Kenneth Jarrett, a former senior diplomat and the promising on paper, they lacked detail and would depend
president of the American Chamber of Commerce on how effectively they were implemented. Although
in Shanghai, said equal access to markets would be Zarit is critical of how some things work in China, he’s
leverage to address some of the issues in China: “Now wary of the kind of confrontational approach to trade
suddenly you have so much Chinese investment that Donald Trump has talked about. The president-elect
going into the United States, [which] does provide an has threatened to slap tariffs of as much as 45 percent on
opportunity. It also has a symmetry because you can use Chinese goods, a move experts warn would set off a cycle
it as a point to put pressure on the Chinese government of retaliation. “Treatment of American companies in China
to ease up at this end.” China registered record high has been deteriorating,” he said. “And a trade skirmish, or
outbound investment of $170 billion in 2016 (Tang). a trade war, could possibly see the treatment of American
There are so many cash-flush investors in China that companies deteriorate even further” (Mullen and Rivers).
there are fewer good opportunities to buy companies, According to AmCham China’s 2017 China Business
and so people with money have fewer places to put it, Climate Survey Report of its members, 81 percent of
said Eswar Prasad, a professor of trade policy at Cornell. responding members said they felt foreign businesses are
Such investors might have once put their money into U.S. less welcome in China. That’s up from 77 percent a year
securities, but the rate of return is low, so they’re turning earlier. Furthermore, labor expenses are rising in China.
their attention to buying foreign companies instead. “The According to the same report, American businesses in
U.S. is seeing the same pattern of increasing Chinese China cite rising labor costs as their top problem. That’s in
investment that is taking place worldwide,” Rosen said. part because worker organizations are gaining strength,
Often, investors buy existing companies overseas simply and strikes and labor disputes are becoming more
as an investment. The Chinese manufacturer Haier common. Today, Chinese manufacturing wages adjusted
bought General Electric’s appliance division in 2016, for for productivity are $12.47 an hour, compared to $22.32
instance, and a consortium of Chinese investors bought in the United States, according to the Boston Consulting
the printer company Lexmark (Semuels). Group (AmCham and Bain). Wages aren’t the only costs in
China that are rising. The price of electricity has increased
Ninety-seven percent of Chinese investment in the 15 percent since 2010, and industrial land is becoming
U.S. was made through acquisitions, which makes it more expensive too. These factors alone would be enough
vulnerable to national security reviews by the Committee reason to give American companies pause about locating
on Foreign Investment in the U.S.. The reviews led to factories in China, and these are other reasons Chinese
lower investment in the politically sensitive information, businessmen are looking outside of their own country for
communication and technology sector of $3.2 billion in investment opportunities.
2016 compared with $5.8 billion in 2014. Daniel Rosen,
24
