U.S.-China Financial Opportunities and Challenges

IMGXYZ3587IMGZYXSince the Sino-U.S. rapprochement in the 1970s, trade between the United States and China has ballooned to over $400 billion dollars. While trade forms the bedrock of bilateral relations, significant hurdles still need to be resolved in order to further economic cooperation.

The Carnegie-Tsinghua Center for Global Policy and the Beijing American Club hosted a panel event to discuss the state of U.S.-China economic relations.  Carnegie’s Paul Haenle opened the forum and introduced the U.S. Ambassador to China, Gary Locke, who gave the keynote remarks.

The panel was composed of key members of the American and Chinese financial communities, including Rockefeller Financial’s chief executive officer Reuben Jeffrey, the Cowen Group’s chairman and chief executive officer Peter Cohen, China-AMC’s chief international business officer John Li, CITIC Securities’ managing director Guo Dajiang, Bingham Consulting’s co-managing partner Ye Xiaowei, and Caixin Media’s editorial board member Ye Weiqiang. Tsinghua University’s Patrick Chovanec moderated.

Key Points of Discussion:

• China’s “Going-out Strategy”: The Chinese government is seeking to strengthen local companies and State Owned Enterprises, leading Chinese firms to increasing investment abroad, panelists explained. A more open regulatory and legal environment in the developing world is leading to high levels of Chinese investment in Africa and Latin America. However, political risk in these countries can be high, and there is a growing trend amongst Chinese firms to invest in the EU and the United States, added the panelists.
   
• Room for Improvement: Chinese firms are unfamiliar with the U.S. business culture and the regulatory framework surrounding investment, panelists said. These firms perceive the United States as hostile to foreign investors; they cite the Huawei and Unocal cases as evidence of this hostility. Panelists suggested that some of these tensions could be diminished by increased low-level bilateral interactions, such as Chinese students studying in the United States or consulting with American legal, accounting, consulting, and public relations firms. 
   
• The “Three Trillion” Goal: The American Chamber of Commerce has announced that over the next three decades the United States will aim to see one trillion dollars in annual exports to China, one trillion dollars in annual sales in the Chinese market, and one trillion dollars of investment by Chinese firms in the United States, panelists said. However, achieving this goal will require significant changes to the current U.S.-China bilateral relationship. Panelists suggested that U.S. policy makers need to overcome their reluctance to attract more Chinese investments. The public perception that greater Chinese business in the United States means fewer jobs for Americans is false, panelists added. Greater investment, particularly by the Chinese, will bring more business and create jobs in the United States.
   
• The Currency Sideshow: The congressional debate over the value of the Chinese currency has continued to perpetuate tension into U.S-China economic dialogues, panelists said. The U.S. economy would benefit more from looking internally to resolve its economic issues, such as updating outdated regulations. This would stimulate economic growth in the United States, panelists said. However, they added that the issue over the value of the renminbi needs to be resolved. China’s move towards a free exchange rate would allow lending institutions and companies to better manage the risks involved with doing business abroad and compete more efficiently.