Expanding China’s Investment in USA, Seeking Mutual Benefits
-Dr. Fengbo Zhang’s Speech at Beijing Forum 2011
CHINA DAILY 中文
1. Current Status
Last year (2010), foreign investment to USA increased 49%, or $22 billion; China’s share was less than 1%. While China’s investment in the USA increased quickly from 2006 to 2010 by as much as 25 times, the investment represents only 0.1% of China’s total direct foreign investment in the USA and is considered “initial stage”. Indeed, it seems more logical that Chinese countrymen who vigorously flock to USA to invest most result in tourism rather than an investment opportunity. The USA is a world investment haven creating a bargain market for foreign investments’ as it is starting to shake the economic hangover and recover from its recession. China’s investment in the USA is still slow and would be prudent to take advantage of the pending market surge.
2. Golden Opportunity
It’s a once in a life time opportunity to invest in USA now.
As the top economic power in the world, USA established a standard market order and a well-developed legal system therefore; it becomes the first choice for the global investors for both safe and high return.
In the 1980s to 1990s, when I organized and coordinated the colossal investment to USA from Japan, it was resisted by the whole country. Now the situation has totally changed, everyone from President Obama to Congress and business communities, from the media to the American people, all warmly welcome and have a great expectation for China’s investments.
Expanding China’s investment in the USA will improve China’s market position, management skill, gain international experience, and help China to be partner of international society. While China’s market growth is quite strong right now, nothing lasts forever and growth can be insured by investing in other markets, especially ones’ that have taken a beating. The USA needs China’s investment to recover from recession, to increase employment, and to support its continued economic growth. Therefore, promoting China’s investment to USA is a win-win method to meet both countries’ long-term economic interests.
Now is the best time for China’s investors to put their money in the USA markets. Not to long ago, the Japanese invested in the USA while the US economy was booming. Unfortunately for the Japanese, they acquired their assets at a market high in price and are suffering through losses. With the USA economy nearly bottomed out, it’s a great chance for low cost investment to a bargain market.
3. Investment Policies
Basing my opinion on more than 20 years personal experience in New York for organizing Japanese investment to USA and lending business in the leading financial institutions, I propose these measures to Chinese investors to succeed in USA market
When I represented Japanese investment to USA, my office was located in the New York Nippon Club Tower owned by my company. It’s Japan’s biggest overseas center whose members include all the top Japanese companies in addition to Japan’s three ambassadors to the USA, United Nations and New York. It’s the Control Center for Japanese investment to the USA and it’s also a major place of exchange and cooperation for Japanese and USA government and business leaders. China also needs to establish a Central Control Center composed of top government officials and industry leaders to support its oversea investments. It needs to appoint talents with international experience and professional knowledge, to support China’s investment, promote smooth and successful cooperation with USA industries.
In late 1980s, in the initial period of Japanese investments to USA, I published many articles in the USA’s Japanese language newspapers and magazines, introducing the American economy, finance, laws and regulations, societies and successful investment skills, to guide Japanese investors. For the Chinese investors who want to make investment to USA, they must learn, understand, and follow up with USA’s laws, culture and social customs to strengthen relationships and promote cooperation with the USA’s government, congress, industries and society. With such a commitment, China can they succeed in investment and realize sustainable operate in local.
Before making investment decision, China needs feasibility study regarding investment risk, challenge and returns, to prepare long-term plans and to develop comprehensive countermeasures to control investment risks
Low-Key, Pure Business Purpose
Many Chinese companies prefer to create momentum for their overseas investments by pronouncing pending high profile deals. Before making an actual deal, they would grandly laud the topic to broadly publicize; unfortunately it only created distaste from media and local society thus tarnishing the goal of success. Their competitors and related groups would seize the opportunity to suppress, and cause the investment plans to suffer setbacks.
USA is a marketing-based economic country which is led by private enterprises; the free fair competition principal does not allow government interferences from normal enterprise behaviors. If the business dealing smells of Chinese government involvement, it will cause the matter to be defeat instead. Many Chinese companies follow the lead developed in mainland China by utilizing Chinese central government control style. However, this doesn’t work as well in the USA. The politician's involvements result in the business deal being excessively politicized, and thus cause battles with these government parties and political groups that only cast a dim light and sour words from media, industries, enterprises and society. Some regular mergers and acquisitions have failed due to the negative media hypes, the politician and lobbyists’ involvements.
I have been strongly emphasizing to the Chinese government for many years that Chinese companies who come to USA for investment and business must be low profile and pursue a pure business purpose. They should avoid politics, seeking American partners in related industries who have strong positions and solid notable reputations. The American industries pursue win-win deals. They are glad and eager to provide strong support and cooperation with foreign investors. In order to be successful with foreign investments in the USA, China should base its decisions on profit-making purpose only.
Careful Investments Selection
We should acknowledge that the USA has an open, fair and mature market. There also exist the related laws and regulations to protect national interest, the same as all western developed countries with the investment safety review mechanism. Therefore, when Chinese companies go overseas for investment, they must fully understand and respect these related laws, regulations and policies. Without this practice, even if the first hurdles are cleared, it will be difficult to sustain development.
For example, China investments in the USA must particularly be careful to avoid any military related projects, major infrastructures such as highways, bridges, logistics and distribution equipment; information, energy, mining, smelting, American resources strategy areas, and cutting-edge high-tech field etc. As a result, the foreign investments in the US were mainly concentrated in the manufacturing industry.
The US real estate market is a low risk, high return, less industrial restriction, low technical requirements, with easy finance, less employment issues, and relatively easy to manage the industry. Also it’s the foothold industry for all Chinese investors should enter before making an investment to other industries. Foreign investors, including many Chinese investors who have made great success, are mostly in the US real-estate market.
The Chinese Government should use the great opportunities to promote and support Chinese investment in the USA and seek mutual benefits.
Dr. Fengbo Zhang is a leading Chinese economist.
In 1986, as the first PRC citizen to receive a Ph.D. in economics from an overseas country, Dr. Zhang was a Senior Research Fellow as well as the Founder and Head of the Chinese Macroeconomic Research Group at the State Council of the China Research Center. He introduced Western Economics to China, helped the Deng Xiaoping leadership school in promoting reform and open policy. He is a founder of China’s GDP and established the theory and method of Chinese Macroeconomic Research. In 1988, he was a visiting scholar at Harvard University and the National Bureau of Economic Research USA. In 1989, he was the Chief Economist of Takenaka Corporation USA, and Secretary and Treasurer of the Nippon Club Tower - the largest Japanese overseas center. He represented leading Japanese companies during the rapid investment boom in the USA, including investments to Rockefeller Center, Hollywood / Columbia Pictures. He joined Fuji Bank in 1996, and weathered the World Financial Storm in 1997. In 2003, he joined Citigroup as a Senior Vice President, and was awarded the CitiStar – Citibank NA’s highest honor, during the financial crisis in 2008 and 2009. He published more than 10 books, is regularly invited to speak to Chinese government and business leaders and international forums.