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China’s Investment Curbs Prompt U.S. Frustration, Locke Says

U.S. secretary of commerce Gary Locke
Gary Locke, U.S. secretary of commerce. Photographer: Joshua Roberts/Bloomberg

May 4 (Bloomberg) -- China has failed to deliver on pledges made to the U.S. to guarantee equitable treatment of foreign investors, creating “real frustrations,” Commerce Secretary Gary Locke said.

Locke, who is waiting for Senate confirmation to be the next U.S. ambassador in Beijing, said China pledged twice in the past two years to lift restrictions on foreign investments in industries where U.S. companies hold a competitive advantage.

A recently issued regulation “falls far short of that promise,” Locke said in a speech in Washington today. “There are real frustrations within this administration and among business and congressional leaders about the commercial environment in China.”

China, the world’s second-largest economy, is the second-biggest U.S. trading partner after Canada. Its record trade surplus with the U.S. has prompted complaints from lawmakers including Representative Sander Levin, a Michigan Democrat, that China has unfair trade and currency policies.

In addition to the foreign-investment rules, China has failed to live up to pledges to publish drafts of regulations and to crack down on the theft of copyrighted and trademarked goods, Locke said.

Locke spoke at a conference at the Woodrow Wilson Center in Washington on the growing investment in the U.S. by Chinese companies. That investment doubled in each of the past two years to $5 billion in 2010, and is set to increase at that same rate in the future, according to the report’s author, Dan Rosen, principal with the Rhodium Group, a New York-based economic research firm that specializes in China.

Technology Transfer

“What we see is China moving up the value chain and closer to the customer,” Rosen said today. He said the U.S. should do more to attract investment from China, saying it will aid the economy and boost jobs.

While Chinese investment is growing, representatives of U.S. companies say they are increasingly troubled by rules in China that force the transfer of technology to Chinese counterparts as the price for access to that market.

“The state capitalist approach is increasingly resulting in discrimination against U.S. goods and services and is putting our companies at a competitive disadvantage,” business groups including the National Foreign Trade Council and the U.S. Chamber of Commerce said in a letter to Michael Froman, President Barack Obama’s deputy national security adviser, on April 15.

U.S. business groups and lawyers discussed how to impose new restrictions on state-tied companies at an event hosted by the Chamber of Commerce in Washington yesterday.

“The U.S. government needs to seriously evaluate the national-security implications of these policies,” said James McGregor, senior counselor in China for APCO Worldwide, a public-affairs consulting firm.

Editors: Larry Liebert, Nerys Avery

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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