As published in the Daily Journal of Commerce
China’s spectacular economic rise since being opened by Deng Xiaoping has largely been the result of indigenous industrial growth, alone or with foreign joint venture partners. It has become the world’s top manufacturer and exporter of goods, and amassed an enormous trade balance, with the United States in particular.
Since Beijing announced its “Going Global” initiative a decade ago, along with the pressure of China’s accumulating liquidity (cash) in state-owned and private enterprises, the country is looking abroad. Now, outbound direct investment (ODI) is the latest major economic trend in the world’s most populous nation.
The U.S. government is encouraging Chinese and other foreign investment in America with a program called EB-5, which allows foreign investors to obtain visas with an investment ranging from $500,000 to $1 million, depending on the neighborhood, in projects that create jobs.
Of course, the success of this program will depend on the ability of the promoters and their development partners to entitle, finance and construct job-creating enterprises, a not altogether simple task in our heavily regulated state.
But the bulk of China’s ODI will not be through the EB-5 program. This month the U.S. Department of Commerce reported that direct investment by foreign nationals in the U.S. exceeded $1.7 trillion in the past decade, when EB-5 investment was nominal, and supports more than 5 million U.S. jobs.
China ODI alone in the decade to come could easily exceed that, by some multiple impossible to predict, and support millions more jobs. This compares favorably to the U.S. stimulus act, which we recently learned generated 2.5 million jobs, and China ODI jobs are created privately without any taxpayer support or tax breaks.
Oregon has much to offer the Chinese investor, for whom food, agricultural products, timber, beer and wine are high on the list of targeted investments. In addition, Oregon’s leadership in sophisticated nano-technology, solar and wind power provide opportunities for cooperation and collaboration, as China struggles to find alternative energy solutions to replace the coal that pollutes its skies.
American exports of goods and services to China are increasing 50 percent faster than with any other country, and China is now America’s second largest export market. Oregon is a meaningful part of the picture. The BBC World Service reports that China is now our state’s biggest customer, buying $4 billion worth of goods in 2010 alone. Atop the list are high-tech computer and electronic components.
The possibilities of a robust Oregon-China trade are enormous if we embrace our new investment partners and avoid at all costs xenophobic, isolationist tendencies that will surely act as a disincentive to Chinese investment, which is being lured by other states and nations. Our special history of embracing racial and cultural diversity and our existing community of American and foreign-born Chinese professionals bode well for the exchange.
The Chinese investors we have represented are committed to complying with all local laws and learning our business practices. So, we also must be committed to learning from successful Chinese investors, whose expertise and entrepreneurialism has led to their ability to amass capital and invest abroad.
No longer can or should Americans suffer from hubris and a false exceptionalism. Today, China and America are successful market economies. In a world where all human interaction can be viewed as either trade or war, let us embrace trade and cooperation with the emerging global power in a new multipolar world.