US urges China to lift restrictions on investment

AP News
Posted: May 04, 2011 2:59 PM

The U.S. 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.

Commerce Secretary Gary Locke said Chinese companies are freer to operate in the United States than U.S. firms are in China. American companies are frequently 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 also 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.

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

Chinese foreign direct investment now 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 coming decade could total between $1 trillion and $2 trillion.

That could offer hundreds of thousands of jobs and new streams of tax revenue for the U.S. 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 U.S. risks squandering economic benefits because of political "fear-mongering" about China.

Some major Chinese investment overtures into the U.S. 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 that the sale might jeopardize national security. Technology giant Huawei has also struggled to gain a foothold in the U.S.

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 future investment.

The report says Chinese investment in the U.S. 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 terms of value, about two-thirds comes from state-owned enterprises.

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. .