While China-U.S. economic relations under the next U.S. administration have been the topic of much speculation lately, a report released on Monday showed that bilateral investment ties are far stronger and hold greater potential than most people realize.
The report, Two-Way Street: 25 Years of U.S.-China Direct Investment, is a study by the National Committee on U.S.-China Relations (NCU.S.CR) and Rhodium Group, which tracks Chinese foreign direct investment (FDI) in the U.S..
Based on its own novel dataset, the study finds that the commercial stakes on both sides are two- to four-times higher than commonly used statistics suggest.
While China's official statistics put the Chinese FDI stock in the U.S. at $41 billion (twice the official U.S. estimates of $15 billion to $21 billion), the study counted 1,200 individual transactions between 1990 and 2015 with a combined value of $64 billion.
The same goes for U.S. FDI in China. Unlike the U.S. Bureau of Economic Analysis' figure of $75 billion in stock of U.S. FDI in China as of 2015 — and China's Ministry of Commerce's number of $70 billion — the study counted some 6,700 U.S. investments in China with a combined value of $228 billion.
"We hope this is another contribution we can make to bringing more transparency in U.S.-China investment relations," said Thilo Hanemann, director of Rhodium's cross-border investment practice and one of the authors of the report.
The data show that while some Americans are eager to talk about imposing reciprocity requirements for inward Chinese FDI, the cumulative value of U.S. FDI transactions permitted in China to date is four times that of China in the U.S..
While many Chinese complain about the lack of openness in the U.S., the data show that the U.S. is open and welcoming to Chinese investment, and that Chinese companies are now investing more in the U.S. annually than U.S. companies are in China.
These observations emphasize that both sides need to reconsider the data before staking out new policy positions, according to the report.
The study also finds that benefits from FDI are huge for both sides, mostly at local levels. U.S. companies now employ 1.6 million workers in China, while Chinese FDI in the U.S. at an earlier stage has already created more than 100,000 U.S. jobs.
Steve Orlins, president of the NCU.S.CR, said that unlike trade, which has been controversial in the U.S. election, investment creates jobs.
He recalled a trip four weeks ago to Dayton, Ohio, where Chinese company Fuyao Glass opened the world's largest automotive glass facility in a closed GM factory, hiring more people than the previous GM factory had.
"I watched the rebirth of the community. That's part of what this story is today," Orlins said.
