2011 report to congress - U.S.-China Economic and Security Review ...

dkrause on DSKHT7XVN1PROD with $$_JOB4$60.5 billion in 2010. The Chinese Ministry of Commerce estimatedthat in 2010, cumulative Chinese FDI in the UnitedStates was $4.9 billion.• The Chinese government guides FDI into those sectors it wishesto see grow and develop with the help of foreign technologyand capital. Foreign investors are frequently forced into jointventures or other technology-sharing arrangements, such assetting up research and development facilities, in exchange foraccess to China’s market. Meanwhile, large swathes of the Chineseeconomy are closed to foreign investors. China’s investmentpolicies are part of the government’s plan to promote thedevelopment of key industries in China through access to foreigntechnology and capital.• Chinese FDI in the United States is a relatively recent phenomenonand remains very small compared to the U.S. investmentin China, but there is great potential for growth. Chinahas stated a desire to diversify its holdings of foreign exchange,estimated at $3.2 trillion in mid-2011, the majority ofwhich is invested in dollar-denominated debt securities. Aswith other statistics, there are discrepancies between officialU.S. and Chinese statistics on bilateral investment.• Due to the considerable government ownership of the Chineseeconomy, provision by Chinese companies of critical infrastructureto U.S. government or acquisition by Chinese companiesof U.S. firms with sensitive technology or intellectual propertycould be harmful to U.S. national interests. The Committee onForeign Investment in the United States investigates the nationalsecurity implications of mergers and acquisitions by foreigninvestors of U.S. assets.• In areas where there are no national security considerations,Chinese FDI has the potential to create jobs and economicgrowth.• China has recently introduced a national security investmentreview mechanism similar to the Committee on Foreign Investmentin the United States, although there are concerns amongforeign companies that the Chinese government may use themechanism to derail investment by foreigners in those companiesand sectors it wants to remain under government control.Indigenous Innovation and Intellectual Property Rights• China’s indigenous innovation policy is an outgrowth of thegovernment’s broad industrial policy and has been openly developedand documented through public plans and pronouncements,particularly the National Medium- and Long-TermPlan for the Development of Science and Technology (2006–2020). The indigenous innovation policy seeks to nurture certainhigh-wage, high value-added industries designated by thegovernment. Chinese firms are to be favored over foreign firmsor China-based foreign affiliates in government procurementcontracts. State-owned enterprises and municipal and provincialgovernments are also to show favoritism to Chinese domesticindustries and businesses.VerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\GSDD\USCC\2011\067464.XXX 067464