I am delighted to be writing the foreword to the sixth annual Two-Way Street report, a resource created by the National Committee on U.S.-China Relations and Rhodium Group that provides unparalleled data and analysis of two-way capital flows. When we launched this project in late 2016, in the National Committee’s 50th anniversary year, much of the emphasis was on the new wave of Chinese direct investment entering the United States and the continued importance of U.S. investment in China. As the data documented, bilateral investment ties were deeper than thought, benefiting both countries’ economic activity and serving as important, if underappreciated, ballast for the relationship.
How times have changed. In 2021, with both nations recovering from the COVID-19 pandemic, the complexion of the relationship has changed dramatically. Bilateral investment has not continued along the trajectory we saw years earlier and, arguably, neither nation’s economic interests have been particularly well served.
At the time of writing, President Biden’s team is undertaking a thorough review of the previous administration’s China policies, looking to undo policies that unnecessarily curbed Chinese trade and investment. But even after President Biden’s first hundred days, tariffs that hurt the American consumer have been left in place; executive orders that force the delisting of Chinese companies from U.S. exchanges have not been reversed, sending busi-ness to other countries and costing America jobs. Congress, too, has a role, finding opportunities to speak and act in ways that actively discourage a Chinese presence—especially an investment presence—in the United States.
China's actions have contributed to the badly deteriorated bilateral investment environment as well. Maintaining strict capital outflow controls, cracking down on some of the country’s main private outbound investors, deep-ening industrial policies to promote self-reliance and independence from foreign markets, and continuing reprehensible policies in Xinjiang and Hong Kong, for example, have greatly reduced investment that might have otherwise taken place.
As the post-pandemic recovery continues—and after a volatile 2020—many investors have begun taking stock to make decisions that will shape global value chains for the coming decade. That is why this year’s report is more important than ever. By making bilateral investment data transparent, it provides thought leaders in the business and policy world in both the United States and China with ample food for thought and encourages pol-icy that is well informed and data driven, rather than the product of emotions or politics.As no one is better or more thoughtful at collecting, analyzing, and presenting this two-way investment data than Rhodium, it is a great pleasure to be working with the firm once again. It is our hope that our joint report will serve as a public good in both countries, providing a more complete picture of U.S.-China investment flows, their value to both countries, and their impacts on the bilateral relationship.
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