Reports: Chinese FDI no threat to US

Two reports may help ease the growing concern among some American politicians toward Chinese foreign direct investment in the United States.

One, to be released on April 25 by the National Committee on US-China Relations and Rhodium Group, will provide the latest picture of Chinese FDI in US congressional districts.

The new report, NewNeighbors shows that annual Chinese FDI in the US has been on a steep growth trajectory for the last five years, hitting $46 billion in 2016, tripling the previous record of $15 billion in 2015, according to a preview of the report posted by Rhodium.

Chinese companies added 1,300 US operations in 2016 through acquisitions and greenfield projects, bringing the total number of Chinese-owned operations in the US to 3,200 by the end of 2016, according to the report.

Nearly all congressional districts now host Chinese-owned companies. By the end of 2016, 425 out of 435 congressional districts, or 98 percent of the total, hosted Chinese-owned firms.

While in previous years coastal California and New York were the largest recipients of Chinese capital in 2016, Chinese investors also expanded to several states that had not received significant Chinese FDI before, such as Kentucky, Georgia and Arizona, according to the report.

It shows that Chinese companies employ 141,000 Americans, a 53 percent increase from 2015 and more than nine times higher than 2009. The figure does not include jobs during construction or at suppliers.

Despite a booming 2016, the report says that 2017 is uncertain. “The commercial rationale for further Chinese expansion in the United States remains strong, but Chinese balance of payments problems and capital controls, the prospect of more restrictive US policy, and an uncertain outlook for broader US-China economic relations are likely headwinds,” it said.

The second report, prepared by the Rand Corp for the USChina Economic and Security Review Commission and sent by Rand to the press on Monday, examines Chinese FDI in the US commercial aircraft sector and its implications for US competitiveness and national security.

It shows that China uses a whole-of-government approach. But while strengthening its commercial aviation industry broadly supports Chinese military aviation in general terms, not all commercial aviation technology is transferable to military aviation. This is because some civil technology does not include specific military needs such as stealth, advanced forms of radar and supersonic engines.

The report concludes that US competitiveness is unlikely to be threatened in the near future because China’s large commercial aircraft — the C919 — may face further production delays and operate less efficiently than existing aircraft.

But it said that as Chinese aircraft improve efficiency and achieves US or European certification, the competitiveness of US aircraft could be negatively affected first within China, and then abroad.

There have been calls among US lawmakers to tighten the screen of the Committee on Foreign Investment in the United States (CFIUS), especially with regard of FDI from China.

China was the focus of an April 6 talk on CFIUS reform held at the Center for Strategic and International Studies (CSIS).