‘Trust deficit’ is keeping US from approving investment by Chinese companies, conference hears

Concerns about national security are harming investment by Chinese companies in the United States and could potentially lead to trade action by US President Donald Trump, experts told the 2018 South China Morning Post China Conference on Thursday.

Fears over theft of intellectual property by Chinese government-led investment have created a political movement in the US calling for tough action against the world’s second-largest economy.

This comes at a time when the Chinese financial services industry is undergoing its biggest liberalisation since 2007, following a state visit to China by President Trump in November. China’s deputy finance minister, Zhu Guangyao, recently announced foreign companies would be allowed to hold majority stakes in joint ventures with mainland securities companies.

“The fundamentals in the state department have always been that the US warmly welcomes foreign direct investment. The problem is to the extent that the investment decisions are not being made on the ground by businessmen in China, but instead for strategic purposes by authorities in Beijing,” said Daniel Russel, diplomat in residence and senior fellow at the Asia Society Policy Institute, and a former assistant secretary of state for East Asian and Pacific Affairs at the US Department of State.

“I think the warning signs point towards some sort of tough trade actions by the Trump administration towards China,” he said, as anxiety rises over strategic investments led by the Chinese government. “There is a trust deficit.”