Promoting China-U.S. Economic Relations through the Bilateral Investment Treaty

However, since 2000, more and more Chinese enterprises have been equipped with the capacity to invest in the U.S. as China’s economy has developed in leaps and bounds. China’s direct investment in the U.S. increased from US $587 million in 2007 to US $5.2 billion in 2012; today, China’s direct investment in the U.S. has surpassed U.S. direct investment in China.

However, China’s investment in the U.S. has been hampered by frequent discrimination from the CFIUS. Chinese enterprises have undergone countless frustrations and failures in their investment and acquisition moves in the U.S., including CNOOC’s failed purchase of the U.S. oil company Unocal Corporation and Sany Heavy Industry’s frustrated attempts at investments in the U.S., which make the BIT negotiations seem even more necessary for China.

First, the BIT will ensure much fairer treatment for Chinese enterprises in the U.S., stemming the U.S.’ tendency to politicize investment issues. Out of national security considerations, the U.S. Congress is often suspicious of Chinese investment. The BIT will ensure Chinese firms’ national treatment. Moreover, whenever investment disputes arise, they can turn to an impartial third-party organization for settlement.

Second, the BIT will help to balance bilateral trade. China’s direct investment in the U.S. can alleviate such issues as imbalanced trade, exchange rate friction and employment – over the past five years, Chinese enterprises have created over 70,000 jobs in the U.S. through investment.

Third, the BIT will propel China’s domestic economic reform. China’s 30-plus years of reform and opening-up testify that external competitive forces can become driving forces for its domestic market-oriented reform. China’s entry into the WTO in 2001 successfully promoted China’s marketization level and economic development. The China-U.S. BIT is bound to become an external driving force for China to deepen reform.

Promoting China-U.S. Relations

China and the U.S. are shaping a new pattern of relationship between great powers, with a connotation covering non-conflict, non-confrontation, mutual respect, mutual benefit and win-win results. It can be said that the mutual beneficial and win-win economic bond is the foundation of the China-U.S. relationship. Therefore, the BIT will contribute to sound development of bilateral relations.

First, the investment treaty will provide a legal guarantee for bilateral economic relations, thus avoiding the tendency to politicize economic and trade issues. Moreover, Chinese enterprises will receive much fairer treatment in their investments and acquisitions in the U.S., with the impact of the CFIUS on these matters diminishing.

Second, the investment treaty will help the two countries to resolve the existing problems in economy and trade, including trade imbalance, disputes over exchange rates, and market access. Over the past 10 years, bilateral trade and economic friction have become even more salient, with solutions and relaxation urgently needed. The BIT will play a significant role in balancing bilateral trade and harmonizing economic relations.

Finally, legal and systematic guarantees provided by the investment treaty will promote the two-way flow of direct investment between the two countries. China’s direct investment in the U.S. will create more job opportunities for American people, strengthen connections with China’s domestic enterprises and market, and meanwhile introduce more innovative development to the U.S. Driven by the market forces, the peoples of the two countries will deepen their understanding of each other with more frequent communication, thus laying a solid foundation for a bilateral relationship.

QU BO is vice director of the Institute of International Relations, China Foreign Affairs University.