To evaluate the impact of increasing Chinese investments in the United States, U.S. policymakers must first understand that China isn’t merely participating in the global free market—it’s playing hardball to ensure that its firms gain global market share at the expense of their competitors, Rob Atkinson argued in testimony before the U.S.-China Economic and Security Review Commission.
On a deal-by-deal basis, some foreign direct investment from China is a net positive for the U.S. economy. But at least one-third comes from Chinese state-owned enterprises, and it is likely that considerably more is guided and supported by the Chinese government as part of an “indigenous innovation” strategy that employs mercantilist policies and specifically targets sectors that are strategically important for U.S. national security or economic leadership.
To thwart harmful Chinese investment in the United States without foregoing the benefits of investments that contribute to the U.S. economy, Atkinson offers five policy recommendations:
- Reform the investment review process, including CFIUS;
- Insist on mutual access and treatment;
- Develop stronger analytic competence within federal government;
- Rethink antitrust policy to consider foreign innovation mercantilism; and
- Work with U.S. allies to coordinate measures to constrain mercantilist-inspired Chinese FDI.