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Chinese Investment to the U.S. Speeds Up

12-18 13:33 Caijing
The consensus between China and the U.S. is that if the misunderstandings and current obstacles cannot be overcome, a major opportunity for both sides will be squandered.

By Washington D.C. correspondent Jin Yan and staff reporter Wang Yanchun  

Sino-U.S. economic and trade relations reached a new level of complexity in 2012, as trade frictions continued and China's direct investment in the United States hit an all time high.

Chinese enterprises invested heavily in a number of U.S. industries such as machinery, household appliances, IT, energy, automotive, and the financial and cultural sectors. An independent research firm said that in 2012 China's direct investment in the United States may exceed US$ 8 billion, far beyond the average of over US$ 5 billion in 2010 and 2011.

The industry widely expects Chinese direct investment in the United States to experience explosive growth in the coming years, as part of an overall trend of rising Chinese outbound investment worldwide.

Statistics show that in the ten years from 2002 to 2011, the annual growth rate of China's foreign direct investment has reached as high as 44.6 percent, with the most obvious growth occurring in recent years.

In addition to increasing in total amount, Chinese direct investment has also been expanding to new investment destinations. In the early years, hot spots for China's outbound foreign investment were mainly Africa, Latin America and other regions. Recently, however, with the surge in overseas mergers and acquisitions, Chinese investment is increasingly favoring Europe, North America and other developed markets. In late 2011, the stock of Chinese investment in developing countries (regions) was US$ 378.14 billion, accounting for 89 percent of total foreign investment. In the same year, investment stock in developed countries (regions) was US$ 46.64 billion, accounting for 11 percent and increasing nearly two percentage points over the previous year.

Most analysts believe that the financial crisis in 2008 acted as the primary catalyst to spur the geographical shift of Chinese investment overseas.

David Marchick, managing director and head of Global External Affairs at The Carlyle Group, contends that from an investor's perspective, the United States is the best investment destination in the world. Compared to the European Union which is mired in debt crisis and Japan which has experienced several years of sluggish growth, the United States has gradually come out of the shadow of the 2008 financial crisis and entered a weak recovery phase, said Marchick.

Chinese Minister of Commerce Chen Deming told Caijing that from the perspective of foreign direct investment (FDI), China's inbound and outbound foreign investment will tend to reach near equilibrium in the next 5-10 years.

In addition, in terms new investment trends and potential, Chinese officials share the same view as the majority of market institutions: the United States will be the main destination of Chinese outbound direct investment.

With accelerating investment in the United States already a consensus among the Chinese business community, attention has now turned to specific areas for investment. To some extent, infrastructure projects can provide China with a more practical breakthrough point to increase investment in the United States. Not only is infrastructure construction China's specialty, these types of projects also meet U.S. demand for capital and infrastructure upgrades.

But no matter how strong the policy winds have blown or how intense entrepreneurs' desire has been, for many years there has been no substantial improvement in Sino-U.S. infrastructure investment and cooperation.

From the U.S. perspective, David Marchick told Caijing that the field of infrastructure in the United States is actually a rather complex investment area. The U.S. government needs to determine the market boundaries and balance power between the private sector and government departments. Without these boundaries, it will be difficult to make substantial investment progress, he added.

Chinese companies often complain that certain investment areas in the United States, especially utilities and infrastructure sectors, are not fully open. They also argue that the U.S. government implements regulatory controls on technology exports and the security review process of foreign mergers and acquisitions lacks transparency.

Those issues aside, the consensus between the two sides is that if the misunderstandings and current obstacles cannot be overcome, a major opportunity for both sides will be squandered.

Full article in Chinese: http://magazine.caijing.com.cn/2012-12-16/112366957.html

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