Robert D. Hormats
Under Secretary for Economic Growth, Energy, and the Environment
Ambassador's Investment Forum
Beijing, China
December 5, 2012

As Prepared for Delivery

Thank you, Myron, for that kind introduction.

It is an honor to be here today. I would like to thank Ambassador Locke for inviting me to participate in this forum. The Ambassador has been a great leader in promoting stronger investment ties between the United States and China – first in his role as Commerce Secretary and now here in Beijing. Ambassador Locke’s visionary approach to strengthening ties between Chinese and U.S. companies is a credit to him and his hard-working staff here at the Embassy.

The U.S. is an Open Investment Destination

There is no doubt that two-way trade and investment has benefited both the United States and China enormously, and we both depend on it for our growth and prosperity. Today, at this forum, we are focusing on increasing Chinese investment in the United States, which clearly is a “win-win” opportunity. Chinese investment in the U.S. helps us balance our economies, contributes to domestic jobs and growth in the United States, and supports China’s “Going Out” policy. And I think it is important to emphasize to Chinese companies wishing to invest in the United States – we welcome your investment. The United States provides foreign investors fair, equitable, and nondiscriminatory treatment, consistent with our long-standing open investment policy.

This year the U.S. ranked fourth in the World Bank’s “East of Doing Business Index.” And a 2011 survey sponsored in part by the CCPIT ranked the U.S. as the second most open economy for foreign investment, behind Hong Kong.

Growth of Chinese Investment in the U.S.

The proof of this open investment environment can be seen clearly in the tremendous growth of Chinese investment in the United States. From 2005 to 2011, total Chinese Foreign Direct Investment in the United States increased over 13-fold, from $700 million to $9.5 billion. In the first three quarters of 2012, Chinese firms invested a record $6.3 billion in FDI projects in the United States. Of this $6.3 billion, approximately $3 billion is in energy sector-related industries.

The growth of Chinese investment in the U.S. energy sector has been substantial, starting at almost nothing 10 years ago to reach $8.1 billion in fossil energy and $730 million in renewable energy investments since 2006. CNOOC’s two investments in Chesapeake Energy and Sinopec’s investment in Devon Energy are examples of this growth, as is the Suntech example that we just heard on the video.

And we’ve welcomed Chinese manufacturing to the United States as well.

In addition to the success stories mentioned on the video, companies like Haier (High-er) have been successful in the U.S. for many years. Haier invested in the United States in 2001 when it opened the first Chinese manufacturing plant in the United States – a $40 million production facility in South Carolina. In addition to energy and manufacturing Chinese investment increasingly is focused in the services sector, including entertainment, hospitality, finance, and information technology. The Dalian Wanda Group’s $2.6 billion acquisition of AMC Entertainment earlier this year is a prime example of this opportunity.

Resources for Promoting Investment

The U.S. Government wants to continue to provide information and other resources to foreign companies that want to invest in the U.S. Select USA at the Commerce Department facilitates and promotes inward investment by helping foreign firms learn more about doing business in the United States. The American business community also is playing a very positive role in promoting Chinese investment in the United States. In 2011, AmCham China launched its Invest USA Program, an initiative designed to help Chinese investors pursue opportunities in the U.S.

And a few months ago, the American Chamber of Commerce in Shanghai launched its new SME Center to promote two-way investment between American and Chinese SMEs. I also want to highlight that one of the most productive ways to promote Chinese investment in the United States is by bringing together our state and provincial government officials. They often are the best positioned to build the connections necessary to facilitate investment. Many of our states and cities already have offices in China, and I am pleased that many of those representatives are here today. These offices play a critically important role in facilitating Chinese investment in the U.S.

And at the Department of State, we want to do what we can to help coordinate efforts and to reach out to local governments and companies in China’s provinces and municipalities. Special Representative Reta Jo Lewis – through her energy, enthusiasm, and leadership – has been one of the driving forces in this effort. Her work has included establishing the U.S.-China Governors Forum, which I was privileged to attend last year in Beijing.

And we are broadening our official outreach to China’s provinces. Our Embassy and Consulates already do a tremendous job of outreach throughout China. And I’m looking forward to traveling to Hefei and Nanjing on this trip as part of our continuing efforts to enhance sub-national cooperation.

Challenges Ahead

Promoting Chinese investment in the United States is not without challenges.

(1) We know, for example, that there are Chinese concerns about the Committee on Foreign Investment in the United States (CFIUS). However, I would simply say that CFIUS is limited in scope to cases related to national security and the number of transactions considered by CFIUS is very few – particularly when compared to the high-profile success stories that we are highlighting today.

(2) Another challenge is that as China seeks to have growing numbers of its companies accepted abroad as investing for purely commercial purposes, it will find it hard to be convincing if companies that claim to be investing for commercial considerations or operating on the basis of market principles come from sectors in China that are protected from foreign competition. The same concerns would hold if such companies receive financial or other support at home that artificially increases their competitiveness, or have significant government involvement in their management or control. The “China 2030” report by the State Council’s Development Research Center and World Bank demonstrated that China’s growth model relies too heavily on industrial policies that give special and artificial advantage to domestic firms, particularly SOEs. We therefore continue to support a global economic environment that is consistent with “competitive neutrality” so that all firms, regardless of their form of ownership, can compete on a level playing field.

(3) And as a related point, even as China increases the number of its investments in the United States, it also will need to ensure fair market access for U.S. companies that wish to invest in China and that such investments are not subject to excessive or unwarranted impediments. A recent and well documented report of the U.S. Chamber of Commerce notes “the concerns often expressed by foreign companies, that aspects of China’s inbound investment approval process impede their investments in China, extract valuable commercial concessions as a price for market entry and favor domestic over foreign companies. In short, as China pursues its robust “Going Out” policy, it also needs to ensure it has a fair and welcoming “Going-In Policy.”

Some progress was made in this direction in S&ED IV when China committed to:

  • “implement a more positive opening-up strategy and expand the areas open to foreign investment and the degree of openness,” and,
  • develop a “market environment of fair competition for enterprises of all kinds of ownership and to provide non-discriminatory treatment for enterprises of all kinds of ownership in terms of regulatory policy.”

There is further room for encouragement in that the Strategic Emerging Industry Plan emphasizes production targets for high-tech industries – with sub targets for every province and city – but does not appear to insist that this output be purely Chinese controlled or owned. If so, it could incentivize more provinces and cities aiming to meet these targets to attract foreign investors and establish tougher laws and enforcement measures against IP piracy or forced transfers of technology to attract such investments.

And given the growing importance China – as stressed in the 12th Five Year Plan – places on energy efficiency, pollution control, food safety, a better service sector, and improved health care, many foreign products and firms – through imports and domestic sales – should be enabled to play a far greater role as partners in meeting these goals. Restrictive import or investment measures, in such cases, would seriously impede progress in meeting these objectives of the Five Year Plan.

(4) And, finally, we will need to work together in the coming years to codify our investment relationship through a Bilateral Investment Treaty. We believe the BIT represents a major opportunity to deepen our economic relationship with China and to reassure investors of both countries that markets will remain open, predictable, and transparent.

In closing, I want to emphasize that we are all engaged what could be a potentially enormous “win-win” proposition. Increasing Chinese investment in the United States will be beneficial to both of our countries. As Ambassador Locke said in the video, we welcome you to the United States.

Thanks very much.