Why China Wants a Bilateral Investment Treaty with the United States
30 Pages Posted: 14 Aug 2014
Date Written: August 13, 2014
With much fanfare, the United States and China have recently begun negotiating a high level Bilateral Investment Trade (BIT) that is intended to significantly increase reciprocal flows of capital investment in both countries. This capital can be used in invest in or acquire existing companies in the host sate by companies located in the investor state. The United States believes that a BIT will help “level the playing field” for U.S. companies because many lucrative sectors in China are either completely closed to foreign investment or are subject to restrictions. The United States believes that a BIT will bring new business opportunities for U.S. companies in China and will also encourage Chinese companies to establish new companies or acquire existing companies in the United States, leading to more American jobs. While the benefits to the United States are often touted, there is little analysis in the media or commentary about the benefits to China of a BIT. As China is a one Party state, China will not enter into a BIT with the United States for economic reasons alone but also for political, strategic, and policy reasons. This article identifies three key strategic objectives for China under a U.S.-China BIT: (1) expansion of the reach and power of China’s massive state-owned enterprises; (2) acquisition of U.S. technology and intellectual property assets; and (3) evasion or mitigation of the effects of border measures imposed by the United States on imported goods from China. All three objectives are crucial to China’s long term global strategy to become a leading power in international business and trade.
JEL Classification: K33
Suggested Citation: Suggested Citation