Foreign direct investment flowing both ways between the U.S. and China may be two to four times greater than shown by data from both governments.
That’s according to a Rhodium Group analysis of deals from 1990 to 2015 released in a joint report with the National Committee on U.S.-China Relations.
Nearly 6,700 U.S. investments in China over that quarter century have a combined value of $228 billion, Rhodium found, far beyond the $75 billion U.S. Department of Commerce estimate or the $70 billion from China’s Ministry of Commerce. China’s 1,200 transactions over those years come to a combined value of $64 billion, eclipsing Mofcom’s $41 billion tally and the $15 billion to $21 billion range from the Commerce Department.
For the first time, Chinese companies invested more in the U.S. last year than American companies in China, underscoring the evolution of the world’s two largest economies.
Economic integration "is much greater than official statistics suggest," said Thilo Hanemann, an economist at Rhodium who manages the consulting firm's work on global trade and investment and co-wrote the report. "That means that the costs on both sides from protectionist frictions are much higher than commonly assumed."
Such links may be more crucial than ever after President-elect Donald Trump’s surprise win. Chinese President Xi Jinping told Trump in their first conversation this week that cooperation was the only correct choice for their ties.
Chinese overseas investment surged 53 percent in the first 10 months from a year earlier to 961.9 billion yuan ($140 billion), the Ministry of Commerce said Thursday. Foreign direct investment into China rose a mere 4.2 percent in the same period to 666.3 billion yuan.
U.S. investment in China surged 80 percent in the first ten months while Chinese money headed to America jumped an eye-popping 174 percent.
American companies employ more than 1.6 million workers in China, while that country’s investment presence provides more than 100,000 jobs in the U.S, and the benefits are spread across more than 90 percent of U.S. states and Chinese provinces, according to Rhodium.
"The local benefits have been enormous," the New York-based organizations wrote in their joint report. "These links also facilitate people-to-people relationships to a greater extent than trade and tourism."
More than 1,300 American companies have major operations in China, with 430 of those investing over $50 million and 56 more than $1 billion, Rhodium concluded. U.S. firms are eager to engage Chinese consumers and compete in growth sectors such as services, health care, and research and development, it said.
While some Americans want reciprocity requirements on Chinese FDI, and some Chinese complain about the lack of American openness, "policy makers are well advised to consider how much further along the relationship is than official data suggests," the report said.
"Doing so argues for upgrading the policy framework presently used to manage related opportunities and concerns," the organizations concluded. "Upgrading U.S.-China FDI policy is not just a noble long-term goal but a present necessity."
— With assistance by Kevin Hamlin