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Expanding China's Investment in USA, Seeking Mutual Benefits

 Dr. Fengbo Zhang, a Leading Chinese Economist
 

1. Current Status

China's investment in the USA increased quickly from 2006 to 2010 by as much as 25 times. However it's still in the initial stage with only 0.1% of China's total direct foreign investment. The USA is a world investment haven creating a bargain market for foreign investments'  as it is starting to 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. Last year (2010), foreign investment to USA increased 49%, or $22 billion; China's share was less than 1%. China's accumulated investment to USA is only 2.3 billion, 0.1% of total accumulated foreign investment to USA.  Unfortunately for the Chinese investors who vigorously flock to USA to invest most result in tourism rather than an investment opportunity.
 
2. Golden opportunity

Expanding China's investment to USA will improve China's management skill, gain international experience, and help China to be partner of international society. On the other hand; 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.

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 to Congress and business communities, from the media to the American people, all warmly welcome and have  a great expectation for China's investments.
 Now also is the best investment timing in USA for China's investors. When Japanese invested in USA, the US economy was booming, as a result, Japanese acquired their assets at their market high in price. Now USA economy is 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

Management
When I represented Japanese investment to USA, my office was located New York Nippon Club Tower owned by my company. It's the Japanese biggest oversea center, the members include all top Japanese companies, Japanese three ambassadors to USA, United Nations and New York.
It's the Control Center for Japanese investment to USA, also it's 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 direct 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.
 
Understanding
 In late 1980s, in the initial period of Japanese investments to USA, I published many articles in USA's Japanese language newspapers and magazines, introducing American economy, finance, laws and regulations, societies and successful investment skills, to guide Japanese investors. Chinese investor, who wants to make investment to USA, must learn, understand and follow up with USA's laws, culture and social customs to strengthen relationships and promote cooperation with USA government, congress, industries and society. Only with that, 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, prepare long-term plan and comprehensive countermeasure to control investment risks
 
Low-Key, Pure Business Purpose
Many Chinese companies prefer to create a momentum for their overseas investments by pronouncing a high profile about a pending deal; traditionally making a grand scale approach. Before making an actual deal, they would grandly laud the topic to broadly publicize; unfortunately it only created distaste from media, 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 an marketing economic country which is leaded by the private enterprises; the free fair competition principal does not allow government interferences with the normal enterprise behaviors. If the business dealing stains with official color, it will cause the matter to be defeat instead. Many Chinese companies follow up with the Chinese central government control style; only to go through USA government channels, visit government offices, congressmen, governors or majors for business as a traditional practice. Some political lobbyists fish in troubled waters, seeking money. The politician's involvements result in the business dealing politicization, and thus fall into battles with these parties and groups to cause dislike from media, industries, enterprises and society. Some regular mergers and acquisitions have failed due to the negative media hypes, the politician and lobbyists’ involvements, which made the matters public attention.

I have been strongly emphasizing to the Chinese government for many years, 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, they are glad and eager to provide strong support and cooperation with foreign investors.
In order to be successful foreign investments to USA, China should be based on profit-making purpose, only in this way, can it be supported by its US counterparts. 

Careful Investments Selection
We should acknowledge that the US is an opening, fair and mature market. There are also the related laws and regulations to protect national interest, as 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 you pass the first hurtles, it’s difficult to sustain development.

For example, China investments to US must in particularly be careful, avoid any military related projects, major infrastructures such as highways, bridges, logistics and distribution equipment; information, energy, mining, smelting etc. 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, easy finance, less employment issues, which is a easy to manage 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 made great success, are mostly in the US real-estate market.

Chinese Government should use the great opportunities to promote and support Chinese investment to USA, seek mutual benefits.

Dr. Fengbo Zhang, 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 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.