US Under Secretary for Economic Growth, Energy, and the Environment Robert D. Hormats has called upon China that even as it increases the number of its investments in the United States, it also will need to ensure fair market access for U.S. companies that wish to invest in China and that such investments are not subject to excessive or unwarranted impediments.
Delivering remarks at Ambassador's Investment Forum in Chinese capital Beijing, he cited that a recent report of the U.S. Chamber of Commerce notes "the concerns often expressed by foreign companies, that aspects of China's inbound investment approval process impede their investments in China, extract valuable commercial concessions as a price for market entry and favor domestic over foreign companies. In short, as China pursues its robust "Going Out" policy, it also needs to ensure it has a fair and welcoming "Going-In Policy," Hormatz said.
However, he noted that some progress was made in this direction in S&ED IV when China committed to "implement a more positive opening-up strategy and expand the areas open to foreign investment and the degree of openness," and, develop a "market environment of fair competition and to provide non-discriminatory treatment for enterprises of all kinds of ownership in terms of regulatory policy."
Hormatz said that the Strategic Emerging Industry Plan emphasizes production targets for high-tech industries - with sub targets for every province and city - but does not appear to insist that this output be purely Chinese controlled or owned. If so, it could incentivize more provinces and cities aiming to meet these targets to attract foreign investors and establish tougher laws and enforcement measures against IP piracy or forced transfers of technology to attract such investments.
And given the growing importance China - as stressed in the 12th Five Year Plan - places on energy efficiency, pollution control, food safety, a better service sector, and improved health care, many foreign products and firms - through imports and domestic sales - should be enabled to play a far greater role as partners in meeting these goals. Restrictive import or investment measures, in such cases, would seriously impede progress in meeting these objectives of the Five Year Plan.
He called for codifying US-China investment relationship through a Bilateral Investment Treaty (BIT), which "represents a major opportunity to deepen our economic relationship with China and to reassure investors of both countries that markets will remain open, predictable, and transparent."
He tried to play down Chinese concerns about the Committee on Foreign Investment in the United States (CFIUS).
He admitted that Promoting Chinese investment in the United States is not without challenges.
As China seeks to have growing numbers of its companies accepted abroad as investing for purely commercial purposes, it will find it hard to be convincing if companies that claim to be investing for commercial considerations or operating on the basis of market principles come from sectors in China that are protected from foreign competition. The same concerns would hold if such companies receive financial or other support at home that artificially increases their competitiveness, or have significant government involvement in their management or control. The "China 2030" report by the State Council's Development Research Center and World Bank demonstrated that China's growth model relies too heavily on industrial policies that give special and artificial advantage to domestic firms, particularly SOEs.
The US official said Washington "continues to support a global economic environment that is consistent with "competitive neutrality" so that all firms, regardless of their form of ownership, can compete on a level playing field."
He insisted that increasing Chinese investment in the United States will be beneficial to both the countries.
From 2005 to 2011, total Chinese Foreign Direct Investment in the United States increased over 13-fold, from $700 million to $9.5 billion. In the first three quarters of 2012, Chinese firms invested a record $6.3 billion in FDI projects in the United States. Of this $6.3 billion, approximately $3 billion is in energy sector-related industries.
The growth of Chinese investment in the U.S. energy sector has been substantial, starting at almost nothing 10 years ago to reach $8.1 billion in fossil energy and $730 million in renewable energy investments since 2006.
There is no doubt that two-way trade and investment has benefited both the United States and China enormously, and we both depend on it for our growth and prosperity, Hormatz said. Today, at this forum, we are focusing on increasing Chinese investment in the United States, which clearly is a "win-win" opportunity. Chinese investment in the U.S. helps us balance our economies, contributes to domestic jobs and growth in the United States, and supports China's "Going Out" policy. Welcoming Chinese companies wishing to invest in the United States, Hormatz said the United States provides foreign investors "fair, equitable, and nondiscriminatory treatment, consistent with our long-standing open investment policy."
This year the U.S. ranked fourth in the World Bank's "East of Doing Business Index." And a 2011 survey sponsored in part by the CCPIT ranked the U.S. as the second most open economy for foreign investment, behind Hong Kong.
by RTT Staff Writer
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