Page 46 - 2018 White Paper on the Business Environment in China
P. 46
8 White Paper on the Business Environment in China
China Benefits far More than the FIEs/FAs The third is that ESA’s economic impact analysis
from their Presence in China shows that the benefits generated by U.S. affiliates in
China can be well over a hundred times the value of the
China benefits far more from the presence of U.S. annual USFDI inflows, the numbers most often cited
companies in China than the companies do. China when discussing USFDI into China. All estimates are
accounts for a far lower share of USFA net income than imperfect, but the discussion about the value of USFDI
sales, employment, value added, or R&D expenditures. and USFAs to China should start with the economic
This implies that China is far less profitable on average impact numbers.
for USFAs than the rest of the world. ESA’s estimate of
the economic impact in terms of value added (GDP The fourth is that the additional benefits that USFAs
contribution) of USFAs in 2014 was 13.6 times the U.S. bring to China that have not been quantified in this
BEA reported net income in that year. Thus the value of Report may be as large if not larger than the benefits
the benefits associated with the presence of USFAs in that have been quantified.
China was more than an order of magnitude larger than
the net income impact on the USFAs. The fifth is that similar analysis can be done for
individual U.S. firms that wish to “prove their worth”
The Economic Impact Tools can be Used when it comes to demonstrating the benefits they bring
in Other Countries Too to China.
The tools developed for the China analysis can be The sixth is that similar analysis should be done for
used for any other country for which there are Input- other host countries, as China is not the only place where
Output tables available and for which there is operating “making the case” for the benefits of USFDI and USFAs
data for foreign affiliates broken down by industry. For will be essential going forward.
USFAs, this means that the analysis can be done on the
impact of foreign investment on most of the economies Implications for China
of interest around the world.
The first implication for China is that China has
Implications benefitted enormously from FDI and the presence of
U.S. and other foreign companies. The benefits in terms
There are several implications of this work for U.S. of value added impact have been over hundred times
companies, the U.S. government, and U.S. business the annual FDI inflows. The benefits of the presence
groups; for Chinese policy makers; and for policy have USFAs has been an order of magnitude greater
makers in other countries. These are closely tied to the than the net income they have earned in China,
conclusions identified above. indicating that China has obtained the vast majority
of the benefits. And this does not even include the
Implications for U.S. Companies, the U.S. non-quantified benefits to consumers and business
Government, and U.S. Business Groups customers, the benefits associated with sourcing in
China, and a wide range of additional catalytic and
The first implication of the present work for U.S. spillover benefits to China’s economy.
companies, the U.S. government, and U.S. business
groups is that there is an increasing need to “make the The second implication is that while Chinese
case” for the value of USFDI and USFAs to China and companies are becoming better competitors, and
other host countries. China might not need foreign investment as much as it
did in the past, FDI and in particular USFDI has proven
The second is that specific analysis showing the an extraordinarily cost-effective means of helping to
value generated for China’s economy is likely to be develop China’s economy. This is particularly important
far more effective in changing the discussion about at a time when China is looking for financially
foreign investment in China than legalistic phrases and sustainable growth.
generalities about what is “good for China.”
46
China Benefits far More than the FIEs/FAs The third is that ESA’s economic impact analysis
from their Presence in China shows that the benefits generated by U.S. affiliates in
China can be well over a hundred times the value of the
China benefits far more from the presence of U.S. annual USFDI inflows, the numbers most often cited
companies in China than the companies do. China when discussing USFDI into China. All estimates are
accounts for a far lower share of USFA net income than imperfect, but the discussion about the value of USFDI
sales, employment, value added, or R&D expenditures. and USFAs to China should start with the economic
This implies that China is far less profitable on average impact numbers.
for USFAs than the rest of the world. ESA’s estimate of
the economic impact in terms of value added (GDP The fourth is that the additional benefits that USFAs
contribution) of USFAs in 2014 was 13.6 times the U.S. bring to China that have not been quantified in this
BEA reported net income in that year. Thus the value of Report may be as large if not larger than the benefits
the benefits associated with the presence of USFAs in that have been quantified.
China was more than an order of magnitude larger than
the net income impact on the USFAs. The fifth is that similar analysis can be done for
individual U.S. firms that wish to “prove their worth”
The Economic Impact Tools can be Used when it comes to demonstrating the benefits they bring
in Other Countries Too to China.
The tools developed for the China analysis can be The sixth is that similar analysis should be done for
used for any other country for which there are Input- other host countries, as China is not the only place where
Output tables available and for which there is operating “making the case” for the benefits of USFDI and USFAs
data for foreign affiliates broken down by industry. For will be essential going forward.
USFAs, this means that the analysis can be done on the
impact of foreign investment on most of the economies Implications for China
of interest around the world.
The first implication for China is that China has
Implications benefitted enormously from FDI and the presence of
U.S. and other foreign companies. The benefits in terms
There are several implications of this work for U.S. of value added impact have been over hundred times
companies, the U.S. government, and U.S. business the annual FDI inflows. The benefits of the presence
groups; for Chinese policy makers; and for policy have USFAs has been an order of magnitude greater
makers in other countries. These are closely tied to the than the net income they have earned in China,
conclusions identified above. indicating that China has obtained the vast majority
of the benefits. And this does not even include the
Implications for U.S. Companies, the U.S. non-quantified benefits to consumers and business
Government, and U.S. Business Groups customers, the benefits associated with sourcing in
China, and a wide range of additional catalytic and
The first implication of the present work for U.S. spillover benefits to China’s economy.
companies, the U.S. government, and U.S. business
groups is that there is an increasing need to “make the The second implication is that while Chinese
case” for the value of USFDI and USFAs to China and companies are becoming better competitors, and
other host countries. China might not need foreign investment as much as it
did in the past, FDI and in particular USFDI has proven
The second is that specific analysis showing the an extraordinarily cost-effective means of helping to
value generated for China’s economy is likely to be develop China’s economy. This is particularly important
far more effective in changing the discussion about at a time when China is looking for financially
foreign investment in China than legalistic phrases and sustainable growth.
generalities about what is “good for China.”
46
