US vs China: China Could Create 400K American Jobs by 2020, Says Study


On Friday, President Obama issued a formal order blocking the Chinese-owned firm, Ralls Corp., from acquiring wind farm projects in Oregon. This was the first time since 1990 –during President George H.W. Bush's administration – that a U.S. president has directly blocked a foreign acquisition. This maneuver has added to the faltering confidence of Chinese investors in recent years, which view the U.S. as aggressive in curbing the rapid rise of Chinese economic and political influence. Such a precarious relationship between the two dominant global economic powers is troubling because investment from China could create up to 400,000 jobs for Americans by 2020.

Of course, the notion of China actually creating local jobs in America may be hard to digest amid the political rhetoric in an election year, one in which President Obama has urged American businesses to bring manufacturing jobs back to U.S. soil in a term he called "insourcing." However, there may not need to be a conflict between creating more jobs for the domestic economy and accepting foreign direct investments (FDI) from countries such as China. According to a recent report by Rhodium Group, Chinese employers of U.S. affiliate companies usually retained existing staff and, in many instances, added to them.  Even more important is that their projects involve establishing facilities such as factories, research and development centers, and distribution centers that have long-term economic benefits for local American communities, contrary to the popular belief that China will "strip" American assets and ship products back to their country to solely benefit the Chinese.

The order was based on concerns voiced by the Committee on Foreign Investment in the United States (CFIUS), an interagency effort headed by Secretary of the Treasury Timothy Geithner. Apparently, the project was too close to the Naval Weapons System Training Facility, which is also a testing site for flying military drones. The Chinese firm's lawyer is not convinced that this is the actual reason as there are already wind turbines operating in the area where the project is located. This incident is seen by Chinese investors as one in a long line of attempts in recent years to specifically stem China's role in the U.S. economy, and by extension curtail China's growing economic influence. Similar controversies involve the Chinese government-owned China National Offshore Oil Corporation's (CNOOC) withdrawal of its bid to acquire the California-based Unocal after an antagonistic stance adopted by the U.S. government and Congress's ongoing allegations against telecommunications giant Huawei selling devices that may be "booby-trapped."

Moreover, President Obama's halt of the acquisition have contributed to the prevalent Chinese belief that there is an anti-China sentiment brewing in Washington that involves more than our domestic security concerns. In the recent issue of Foreign Affairs, China sees the U.S. as a destabilizing influence, largely because the U.S. military is established in sensitive regions where it could undermine Chinese dominance in the South China Sea and help opposing parties in controversial maritime disputes. The article notes that this belief is extremely important to understanding how Chinese political and military leaders deal with strategic encroachments from the United States. This reaction has translated over to Chinese concerns that the U.S. may try to restrict its growing global economic importance, which have made business leaders more conservative in their foreign investment outlook.

The article also asserts that the U.S. may have a distorted understanding of the Chinese, for China's actions should not be viewed as an attempt to usurp the position of the United States in the world, but rather viewed as a confident rising power that wants to define its global role and win acceptance from the other powers. This intention is more in line with the view that China is trying to establish autonomy and self-sufficiency by increasing its economic and military might, but not necessarily embark on an aggressive quest of world dominance.

Regardless of whether the claims are correct or not, a report by the Council for Foreign Relations claims that Americans would reap positive benefits from Chinese foreign direct investments. It cites the strengthening of the American manufacturing base, facilitating investment in research and development, bringing Western standards of corporate governance and accounting back to Chinese companies, and boosting U.S. exports to China as important reasons Washington should be more accommodating to Chinese investors. The U.S. could start by reducing impediments to foreign investment manifested in strict visa and tax policies, and by instilling Chinese investors' confidence through emphasis on the majority of business transactions that have been successful such as the acquisition of CNOOC in minority stakes in petroleum companies based in Texas, Oklahoma, Wyoming and Colorado.

The report also advises Chinese investors to become involved in the American communities where they have operations to foster a sense of kinship. There are already communities planned on American soil that will cater to affluent Chinese immigrants, and there have been outcry over whether they will integrate with the locals. However, these concerns may be assuaged because many Chinese plan to settle here and send their children to American schools and universities, while investing in infrastructure that will benefit nearby communities.

With more than $1 trillion from Chinese outbound foreign direct investments expected to flow into the global economy by 2020, the staggering American economy would do well to be on the receiving end.