INVESTMENT SUMMIT KICKS OFF: Commerce Secretary Gina Raimondo will have a something little extra — they call it “lagniappe” in my mom’s hometown of New Orleans — in her pocket this week when she welcomes thousands of businesspeople from around the world today for the beginning of the annual SelectUSA Investment Summit. Aided by the passage of three huge pieces of legislation — the Bipartisan Infrastructure Act, the Inflation Reduction Act and the CHIPS and Science Act, Raimondo is expected to make the case that now is the time for foreign companies to increase their investment in the United States and for new firms to think about getting in. “I know that my members, as well as would-be investors in the United States, have a lot of questions about all three of those big legislative achievements and how they can best leverage off of these public-private partnerships,” said Nancy McLernon, president of the Global Business Alliance, a group that represents foreign companies like Airbus, Honda, Panasonic and Samsung that have extensive operations in the United States. EU says ow!: The hundreds of billions of new spending programs created by the U.S. legislation has already put pressure on the European Union to respond in kind to avoid a massive outflow of investment dollars across the Atlantic. “Competition is tough,” McLernon told Morning Trade. “Countries do what they need to to be competitive. So if Europe is concerned, it means perhaps that we’re doing something right.” Post-pandemic boost: The cumulative stock of foreign investment in the United States totaled more than $5 trillion at the end of 2022, a 40 percent increase from 2016, despite the tumultuous years of the Trump administration, which damaged the U.S.’s reputation overseas. However, annual inflows fell from a record $484 billion in 2015 to a low of $109 billion in 2020, when the pandemic hit and international business travel plummeted. Investment inflows rebounded dramatically in 2021 to $405 billion and remained relatively robust in 2022 at $318 billion. That made it the fifth highest year of the past decade, even though it was down 21 percent from the prior year. UNCTAD, the UN trade and development agency, estimates the United States accounts for about 30 percent of all cross-border investment, making it the No. 1 foreign destination. However, the annual summit provides an important opportunity for the Biden administration to emphasize that the United States remains open to foreign investment, despite concerns overseas that it is becoming increasingly isolationist, McLernon said. Administration-wide push: In that regard, Secretary of State Antony Blinken, U.S. Trade Representative Katherine Tai, Transportation Secretary Pete Buttigieg and several other cabinet officials are scheduled to speak. Bring in the states: Governors from the states of Arizona, Delaware, Indiana, Kansas, Louisiana, Massachusetts, Maine, Michigan, North Carolina, Michigan and Virginia are also attending the conference, along with chief executives from the U.S. territories of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the Virgin Islands. Who’s attending: India has the biggest delegation, followed by Taiwan, China, South Korea, Romania, Nigeria, Japan, Turkey, Israel, Switzerland and Brazil. Not surprisingly, there is no Russian delegation this year. Top sectors: U.S. industry sectors attracting the most foreign interest include information and communication technology, business and professional services, energy, health care, automotive, financial services, food and beverage, design and construction, consumer goods, distribution and logistics, and equipment and machinery. NEW CHINESE INVESTMENT STILL IN POST-2016 SLUMP: China is sending a sizable business delegation despite strained relations with the United States. However, Chinese investors feel less welcome than they did in the past because of efforts at both the federal and state levels to restrict their opportunities, a Chinese Embassy spokesperson told Morning Trade last week. Survey says: The CGCC’s latest survey found that Chinese companies in the United States performed slightly worse in terms of revenue growth in 2022, and had “cautious” expectations about future developments. The companies’ biggest concerns were tensions in the U.S.-China relationship and persistent inflation. Nearly 45 percent expected a further deterioration in relations. Despite that, more than 80 percent of respondents said they were satisfied with all aspects of the U.S. business environment, or were at least neutral on the point. They also said that lessons learned from past ups and downs in U.S.-China relations were helping them cope. The CGCC report also includes several recommendations, including this: “Don’t let a crisis go to waste. Leverage the current downturn to enhance and fortify your operations and capabilities.” FDI trends: Official U.S. government figures show cumulative Chinese investment in the United States in 2021 was around $54 billion, or roughly 1 percent of total foreign investment. The American Enterprise Institute has a higher figure of around $190 billion because it includes deals routed through Hong Kong or third countries that aren’t attributed to China in the official data, Derek Scissors, a China specialist at the right-leaning think tank, told Morning Trade. AEI shows new Chinese investment in the United States peaked at $53.5 billion in 2016, but has tumbled sharply since then due to a combination of factors. Those include a Chinese government clampdown on outbound investment, increased U.S. scrutiny of inbound investment, the Covid-19 pandemic and the worsening geopolitical atmosphere. Chinese investment in the United States did grow modestly to $3.28 billion in 2022 and should rise further in 2023, but won’t be returning anytime soon to the “weird and unsustainable” sky-high levels of 2016, Scissors said. More wariness: Mark Witzke, an analyst at the Rhodium Group, said it has become much harder for governors and local leaders to court Chinese investment because of the “bad publicity” that could come from that. That was evident earlier this year when Virginia Gov. Glenn Youngkin, a Republican, blocked the possibility of Ford building an electric vehicle battery plant in his state because of the concern it would be operated by Chinese company CATL. Ford and CATL eventually figured out a way to make the deal work in Michigan “using a pretty unconventional structure that doesn’t really qualify as FDI in the usual sense,” Witzke said. European option: Rhodium tracks new two-way foreign direct investment between China and the United States. It doesn’t have final numbers for 2022 yet, but Witzke said preliminary figures suggest about a 30 percent decline in both directions from an already low level in 2021. China’s recently-ended strict zero-Covid policy is “part of that story and there might be a bit of a bump after those travel disruptions are rectified but we’re not expecting too much action,” Witzke said. “Chinese investors are having more luck in Europe setting up battery factories and industrial parks for green tech.” NEW CHINESE LAW CASTS CHILL: Meanwhile, the U.S. Chamber of Commerce said Friday that China’s new Counter Espionage law has “dramatically” increased the risks and uncertainties of doing business in that country by casting a wide net over the range of documents, data or materials considered relevant to national security. “This is a matter of serious concern for the investor community and likely is as well for their local business partners in China,” the Chamber said in a statement. “We encourage the Chinese government to consult with the foreign business community on the revised law and then issue implementing regulations that provide reasonable clarity and address the practical questions investors have,” the Chamber added. CHINA TRADE MISSION ANYONE?: U.S. governors from both sides of the political aisle made more than three dozen trade missions to China between 2004 and 2019, according to Morning Trade’s count from searching a couple of hours on the web. Throw in visits led by other state officials and the figure grows even higher, (but we don’t know exactly how much.) The past trade missions include ones led by then-governors Arnold Schwarzenegger (R-Calif.) in 2005, Deval Patrick (D-Mass.) in 2007, Beverly Purdue (D-N.C.) in 2009 and Christine Gregoire (D-Wash.) in 2011, along with several others during those years. The pace accelerated during the second half of the Obama administration, with Jay Inslee (D-Wash.), Jerry Brown (D-Calif.), Scott Walker (R-Wis.), Sam Brownback (R-Kan.) and Nathan Deal (R-Ga.) all leading trade missions in 2013. The first year of the Trump administration, 2017, was another banner year, with Bruce Rauner (R-Ill.), Kim Reynolds (R-Iowa), Asa Hutchinson (R-Ark.) and Eric Greitens (R-Mo.) making the trek. Bill Walker (R-Ala.) and Matt Bevin (R-Ky.) followed in 2018. Taiwan two-step: So as the pandemic fades and trade missions resume, it’s notable that China has not reemerged as a prominent destination. In fact, governors are more likely to irritate Beijing by traveling to Taiwan instead. That’s what Youngkin did last week, when he visited the self-governing island before traveling on to Japan and South Korea. Last year, Indiana Gov. Eric Holcomb, Arkansas Gov. Brad Little and Arizona Gov. Doug Ducey also led trade missions to Taiwan, which is a significant market for U.S. agricultural exports and the home of semiconductor manufacturing giant TSMC. Despite Beijing’s decision to ease its stringent Covid-19 travel restrictions, Craig Allen, president of the U.S.-China Business Council, said he’s not aware of any recent governor-level trade missions to China or any currently in the works. Holcomb, who is attending the SelectUSA conference this week, appears to be the most recent U.S. governor to lead a trade mission to China. That visit occurred in September 2019, before the pandemic suspended travel around the world. Scissors, the AEI China specialist, said the same political factors that make many governors wary of courting Chinese investment seem to be discouraging them from visiting China to drum up more business for their state’s exporters. DeSantis bypass: Florida Gov. Ron DeSantis spent last week leading a trade mission that bypassed both China and Taiwan in favor of Japan, South Korea, Israel and the U.K.
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