Official says restraints for U.S. firms in China unfair

Imbalances hurting ties between nations

5/5/2011

WASHINGTON -- The United States welcomes growing Chinese investment in America, but says China's restrictions on foreign companies operating there are a major barrier to improving commercial relations, a top official said Wednesday.

U.S. Commerce Secretary Gary Locke said Chinese firms are freer to operate in the United States than U.S. firms are in China, but American firms are often shut out of entire industries or forced to give up proprietary information, he said.

"The imbalance of opportunity is a major barrier to continued improvement of the United States and China's commercial relationship," he said, adding that China has recently "narrowed" its commercial environment after a "long and fruitful period of opening."

He was speaking ahead of annual meetings of the U.S.-China Strategic and Economic Dialogue to be held Monday and Tuesday in Washington. The meetings are likely to tackle a perennial U.S. complaint over the value of China's currency, which it says is too low and gives a leg up to Chinese exporters at the expense of American producers.

Mr. Locke, tapped to be next U.S. ambassador to Beijing, spoke at the launch of a report on Chinese investment in the United States. The study was supported by the Asia Society think tank and the Woodrow Wilson International Center for Scholars.

Chinese foreign direct investment represents just 0.1 percent of the total in America, according to official figures. But the report said it more than doubled in each of the past two years and is set to grow rapidly. As economic incentives for Chinese firms to operate abroad grow, China's foreign investment worldwide in the decade ahead could total between $1 trillion and $2 trillion.

That could offer hundreds of thousands of jobs and new streams of tax revenue for the United States. But similar to worries over the emergence of Japan as an investor in the 1980s -- that proved unfounded -- some Americans fear that China, through its sheer size, could gain control of parts of the U.S. economy. The report warned the United States risks squandering economic benefits because of political "fear-mongering" about China.

Some major Chinese investment overtures into the United States have foundered, such as state-owned CNOOC's 2005 bid to buy U.S. oil and gas producer Unocal Corp. Some U.S. lawmakers had complained the sale might jeopardize national security. Technology giant Huawei has struggled to gain a foothold in the United States.

The report says the U.S. investment review mechanism -- which rejected a Huawei takeover of computer company 3Leaf Systems last year -- does an effective job of protecting American security interests, but politicization of the review process would choke off investment.

The report says Chinese investment in the United States during 2003-2010, including projects based on capital raised outside of China, totaled $11.6 billion -- about five times higher than official U.S. statistics that are based on balance-of-payments figures. Most investors are private companies, but in value, about two-thirds comes from state-owned enterprises.

Mr. Locke said Chinese investment is good for American workers and businesses, but he presented a litany of complaints about the freedom of American companies to operate in China, including intellectual property theft and opaque regulatory measures.

China recently retained prohibitions on foreign involvement in certain industries, despite promises to lift them, and a new review system to vet foreign investments is based on vague parameters of national security, he said.