Who Loves China More?
The U.S. and Great Britain are engaged in a fascinating courtship with China, both trying to attract valuable Chinese foreign direct investment at a time when both countries are undergoing economic stress and, frankly, need the money. Interestingly, in this competition, the U.S. role as superpower has put it at a disadvantage. While British Prime Minister David Cameron can visit China with a very clear, focused and simple message, the United States’ efforts at attracting investment are complicated by larger geopolitical issues.
Cameron’s recent visit to China was apparently a triumph. He was accompanied by a delegation that included dozens of British companies looking to do business with China, as well as a large retinue of government ministers. He was able to declare with some justification, “Britain is the most open country in the Western world to Chinese investment.”
As the leader of a “former” superpower, Cameron had the luxury of ignoring the various flash points around China, including the Senkaku/Diaoyu dispute with Japan, global cybersecurity threats, state run capitalism, etc. Instead, Cameron said in a speech in China, “We view China’s opening and development not as a threat, but as a historic opportunity.” He could not be more clear that his priority is strong positive commercial relations with China. The other issues fall by the wayside.
Recently, the American government made its strongest pitch ever for inbound foreign direct investment at an event last month in Washington, D.C. It was called the Select USA Global Investment Summit of 2013. President Obama spoke, as did the secretaries of State, Treasury, Commerce and Labor. I was fortunate to have served on a panel discussing the use of outside consultants when investing in the U.S.
The event’s singular purpose was to attract investment into the U.S. from every corner of the globe. Significantly, of the 600 companies from around the world attending the event, 100 were from China, which constituted the largest delegation. And, like David Cameron, President Obama declared the U.S. the best destination for foreign investment in the world. He said, “I believe there is no better place in the world to do business than the United States of America.” U.S. Ambassador to China Gary Locke put a finer point on the case when he said, “Is more Chinese FDI in America a good thing? The answer is yes. It’s a good thing for American workers. And it’s a good thing for American businesses.”
In most instances like this, you would have to give the edge to the U.S. with the much bigger economy. However, there are complications. As I write, American B-52s are challenging the Chinese air force in a border dispute between Japan and China, which tends to undermine Obama and Locke’s charm offensive to China. Moreover, the Snowden affair in which the U.S. castigated China for failing to facilitate the capture of NSA leaker Edward Snowden when he was in Hong Kong created stress in the relationship. Finally, a very few high-profile cases in which the U.S. government blocked Chinese investments in some sensitive industries has made Chinese companies skittish about coming to America.
Still, even in the face of these challenges, Chinese companies continue to invest in the U.S. at growing rates, culminating recently in the huge acquisition of Smithfields Foods by Shuanghui. At the same, the U.K. is also enjoying growing Chinese foreign direct investment.
So, it will be an interesting competition. Given China’s enormous capital reserves, there may be enough for everyone. At bottom, however, the true beneficiary of this courtship is China. It’s testament to the new role that China plays in the world that it is such a driver of global economic growth.