Risks, Rewards, and Results: US Companies in China and Chinese Companies in the United States

1. Introduction

This testimony supports the second panel of these hearings, focusing on the risks and rewards for US companies operating in China.  We meet during a period of intense negotiation between China and the United States, prompted by the March 2018 findings of the US investigation "China's Acts, Policies, and Practices related to Technology Transfer, Intellectual Property and Innovation Under Section 301 of the Trade Act of 1974" (hereafter "Section 301 report"). The investigation found evidence of Chinese practices of forced technology transfer as well as other forms of intellectual property appropriation. 

Challenges for US-China economic relations extend well beyond the outcome of the current Section 301 case. China has maintained rapid growth for 40 years by continually adapting its economic institutions and policies to changing internal and external conditions and goals.  American companies seeking to serve the Chinese market, therefore, face an ever-evolving policy environment.  My testimony provides an overview of US foreign affiliate activity in China and offers perspective on how China has adapted its foreign direct investment (FDI) policies to further its industrial development goals. Other members of this panel shed light on the consequences of these actions for American business interests.  A clear message emerging from the panel is that the US Congress should monitor Chinese investment policies and view these actions within the wider context of the overall bilateral relationship.  If the US Congress sees fit to counter Chinese practices, the most effective responses will be those taken in concert with allies and that reinforce existing multilateral institutions.

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