STRINGER / REUTERS At a factory in Anhui Province, November 2013.

Getting to Investment Reciprocity With China

Why It's Time to Play Hardball

Every year, the American Chamber of Commerce in China conducts a survey of its members’ business sentiment, and this year, nearly 500 firms responded. Three out of four reported that they felt less welcome in China than they did during the two previous years. Those findings reflect the fact that U.S. firms and investors increasingly encounter an unfriendly and difficult business environment in China. Apple’s patent dispute with a Chinese firm and Uber’s announcement that it would sell its China business to Didi Chuxing, a local rival, provide two recent examples of this trend.

Nobody doubts that the United States and U.S. firms have a major stake in maintaining good political and economic ties with China. But equally real are the special problems that U.S. businesses confront there. They range from unclear and changing regulations to total blocks against foreign investment in such sectors as food and the media. The challenge is how to bring greater parity to those two realities, which means implementing a U.S. policy that aims for full investment reciprocity with China, even if it is phased in over several years and with mutually agreed exceptions for investments in sectors of genuine national security significance. 

That policy must be based on two principles. The first is to recall that in economic and especially in investment terms, China needs the United States far more than the United States needs China. The second is to recognize that when it comes to the business environment for U.S. firms in China, it is a fool’s errand to seek redress directly from the Chinese government, since little success has come via that route so far. The best way to reach Beijing is through the thousands of Chinese individuals and groups with a growing stake in maintaining access to the U.S. economy. When the interests of those domestic voices are sufficiently at risk, Beijing will hear them far more clearly than any pleading from Washington. 

Andrew

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