One of the few propositions on which virtually all China experts—inside as well as outside China—agree is that foreign investmentinChina has been a major contributor to the Chinese economy’s remarkable growth over the past several decades. Between 1992 and 2007, annual foreign investment in China increased sixfold, from $11 billion to $70 billion—a growth that reflected both investment opportunities and their anticipated benefits.¹ In addition to the direct benefits realized from the invested capital itself—whether through joint ventures or equity investment—significant additional benefits accrued indirectly from the technology, management, and marketing that were...

In the evolving global economy, China’s large and growing financial resources will strengthen its ability to seek companies and resources abroad. This leverage will predictably encounter resistance for political and security as well as economic reasons. The resulting challenge for both target investment countries and China is how to nurture the opportunities for and potential benefits from efficient allocation of Chinese foreign investments while avoiding or minimizing risks to the national security and other interests of the United States and other recipient countries. The goal of this research is to develop an understanding of these investments and a methodology to...

China’s foreign investment strategy is distinctive, selective, and flexible. It is distinctive in that it reflects both the central government and ruling party’s broad national priorities that prominently include the salient need of the Chinese economy to sustain high rates of economic growth. The distinctive role of the central government is a consequence of the fact that China’s major foreign capital transactions require approval by the SAB and the SAFE, both of which are accountable to the State Council. When competing claims arise to use China’s foreign investments to help in meeting the demands of the economy, the military, and...

The preceding chapters have provided background for comparing the magnitudes and sectoral composition of China’s investments in the United States, Europe, Asia, and the rest of the world. In light of this background, we begin this chapter with several observations concerning the broad patterns of China’s foreign investments. This leads to our development of a methodology for evaluating potential new investments to assist in identifying the positive and negative factors that may be associated with these investments.

First, with the world’s largest holdings of foreign exchange reserves, China has been making foreign investments to advance multiple objectives: maintaining a stable...

In his opening remarks to launch the first U.S.-China strategic and economic dialogue on July 27, 2009, President Obama observed:

The relationship between the United States and China will shape the 21st Century. . . . The United States and China share mutual interests. If we advance those interests through cooperation, our people will benefit. And the world will be better off, because our ability to partner with each other is a pre-requisite for progress on many of the most pressing global challenges.¹

In the evolving global economy, China’s large and growing financial resources are propelled by having the world’s...