Despite what may seem like a tumultuous political climate between the two economic giants, US businesses continue to invest and profit at great rates in China. As of 2016, $228 USD in 6,677 US investments have been made into China. This growth is expected to continue as the Presidents of the respective countries continue trade negotiations, which have thus far been positive.
Initially, what drew US investment into China were lower startup prices. Now, however, US investors have begun to realize the great opportunities that China presents, especially in terms of its large consumer market which remains robust, with eyes towards entertainment, travel, luxury goods, and e-commerce.
There is a global sentiment that investment in China is a positive venture. This is reflected in the high rates of foreign investment in China, which as of 2014 overtook the United States.
However, this isn’t to say that foreign investment in China doesn’t have its own unique challenges. Among those are the current government restrictions on certain sectors of investment. The Organisation for Economic Co-operation and Development (OECD) has listed China as having one of the most restrictive foreign direct investment of any of the countries the OECD indexes, with countries such as Russia, Indonesia, Brazil, and South Africa calculated as being far more open to FDI than China.
Among the industries most protected from foreign direct investment are forestry, mining, electricity, telecommunications, and financial services.
Some US firms and corporations have noted that they remain hesitant to invest in China due to Chinese laws surrounding property and intellectual property rights, which may have limiting effects that US businesses may receive from their technology and brands.
Fortunately, positive change seems to be coming as US and Chinese relations seem to be headed in a good (and hopefully profitable) direction. First trade talks between the Chinese PresidentXi Jinping and US President Trump have started on friendly terms, with President Xi Jinping making moves to allow the US better access to financial sector investment and certain exports. The Communist Party has also stated in its Third Plenum decision that it will open more sectors to foreign investment and competition.
“We have a thousand reasons to get China-U.S. relations right, and not one reason to spoil the China-US relationship,” Xi said, according to state media.
China’s economy is also expected to continue to mature, though it is a process that will take time, notes Li Lu, founder of Himalayan Capital Management and a man described by Warren Buffett as one of the best investors alive. And as it does so those who choose to get in on the ground floor are more likely to see large dividends.
It is undeniable that US investment in China is a complicated area, requiring guidance from a team that is grounded in the laws and well-connected to government agencies