China appears to be thriving in the age of Trump. Faced with a protectionist US administration in Washington, Communist Party leaders have improbably recast themselves as champions of globalization, free trade and openness. Recently, they’ve admonished Western policymakers to treat Chinese investors more graciously before expecting China to open its own markets further. Greater liberalization, central bank chief Zhou Xiaochuan recently warned, will depend on whether Chinese investors “get better treatment overseas in other countries.”
This condition is difficult to take seriously. The truth is that Chinese companies looking to invest abroad are treated now -- as they’ve been for years -- far better than China treats foreign investors.
Only a handful of deals involving Chinese companies have been blocked anywhere in the world. In 2012, the Obama administration rejected a proposed Chinese wind farm that would’ve been situated uncomfortably near a US naval training facility in Oregon. Last December, on national security grounds, President Obama barred the Chinese takeover of a German chip maker with significant US operations. Chinese companies have also walked away from deals when the Committee on Foreign Investment in the United States, which scrutinizes such takeovers, has indicated an interest in them.
What’s more notable is how warmly Chinese investors have been received, even in sectors that might be considered sensitive. Chinese companies have bought a wide range of foreign technology firms. While politicians have raised concerns about China’s inroads into the US movie industry, not one investment has been blocked. The foreign investment committee says China is the fifth-biggest acquirer of companies dealing in “critical technologies.” It’s either tied with or ahead of key US allies such as Germany, Israel and Japan.
According to a report from lawyers at Covington and Burling, deals involving Chinese companies accounted for nearly one in five cases brought to the attention of CFIUS between 2012 and 2014. The “vast majority” were approved.
European countries have been as welcoming as the US, if not more so. Last fall, the UK approved a $23 billion investment in a nuclear reactor meant to provide power for a significant part of southern Britain. Although Germany has groused about restrictions on investment into China, its government did nothing to stop Chinese appliance maker Midea’s purchase of robotics firm Kuka.
Clearly, even if not all decisions go its way, China would be hard pressed to prove systematic bias against its citizens and companies. What makes Chinese criticism even more problematic is that Chinese regulators have probably killed more deals than foreign regulators have. In the first two months of 2017, amid a broad crackdown, outward investment from China declined 55 percent from the same time last year. According to one report, 30 different transactions involving $75 billion were cancelled last year after Chinese firms failed to secure the necessary domestic regulatory approvals.
The Chinese market also remains much more closed to foreign investors than foreign markets are to Chinese buyers. From walling off several industries to outside investment, to requiring most companies that do invest to form joint ventures with domestic firms, China maintains barriers to outsiders long since lowered elsewhere. Chinese leaders continue to justify such measures by claiming to oversee a small and backward economy, in need of protectionist measures to shelter domestic firms.
This imbalance is breeding a backlash in the West. The latest buzzword in policy circles in dealing with China is “reciprocity.” Policymakers in Washington, London and Berlin are all proposing that they treat Chinese companies no better than their own companies are treated in China.
Chinese leaders will need to decide what type of economic policy they want to pursue: one based on slogans about openness, or one that confidently welcomes outside investment and expertise and competition. Of course, they have every right to demand that Chinese companies be treated fairly. But being a global leader means leading by example.
By Christopher Balding
Christopher Balding is an associate professor of business and economics at the HSBC Business School in Shenzhen and author of “Sovereign Wealth Funds: The New Intersection of Money and Power.” -- Ed.
