Initiative for U.S.-China Dialogue on Global Issues

In the past, the economic ties between the United States and China have strengthened through imports and exports of consumer products, but today room remains for profitable cooperation on foreign direct investments. Opportunities exist because of the limited access to capital. Start-ups rely heavily on resources within their network or support from incubators to grow. If the local business environment fails to provide ample capital, entrepreneurs will likely reach out to larger cities or even abroad for “nutrition.”

In recent years, Chinese investors have been actively investing in small- and medium-sized technology companies in the United States. They increasingly look beyond domestic opportunities as the Chinese economy stabilizes. According to the report by the American Enterprise Institute, Chinese investors are mainly investing in real estate, technology, and financial acquisitions. The total investment in the United States by Chinese-based investors, corporations, and strategic partners in 2016 reaches a record high of $54 billion; in quarter one of 2017, 12.64 percent of all the investment in the United States included a Chinese investor. Although the U.S. government erects barriers to prevent China from attaining any high technology that could be of use under war conditions, it clearly understands the benefit small and medium enterprise (SME) investment brings to both sides.

Despite the promising status quo, a gap still exists largely due to a lack of information on investment opportunities and a deficit in communication due to language and cultural barriers. Investment at the level of SMEs has a higher requirement for the investors’ understanding of the business and personal engagement with the innovator team. Failure to bridge the obstacle of communication adds huge friction to fully utilize the investors’ resources, not to mention pushing the business forward in a foreign market. Thus, an online platform that assembles a social network to nurture a close community of U.S. and China businesses and investors becomes critical.

The venue for U.S. start-ups to access the Chinese consumer market already exists. This year on June 20, Alibaba hosted a small business summit “Gateway’17” in Detroit following Jack Ma’s meeting with President Trump in January. Through Alibaba’s B2C platform, start-ups in the United States can take full advantage of the huge market in China with more than 500 million online buyers; Chinese consumers can also purchase high-quality products from reliable foreign companies through just a single click on Tao Bao. The interest of U.S. entrepreneurs in China indicates their determination to open their minds to a culturally different population. Moving a step forward, a “gateway” should be made available between investors and business from both countries as well, especially for small enterprises, for which personal level interaction and understanding plays a crucial role.

Chinese and U.S. businessmen should be able to connect more frequently beyond the umbrella of government-negotiated deals. The benefit of an extended investment relationship is twofold. First, business ties ease political tension. Previously accusing China as a currency manipulator, President Trump could not resist the temptation of lucrative business deals and chose to back down from his hawkish accusations towards China. Second, successfully paired investors and entrepreneurs not only encourage innovation in both countries and open more job opportunities, but also nurture a transnational business network that facilitates personal communication and cultural understanding in the long run. At my internship with the U.S.-China Innovation Alliance, local technology start-ups in Houston are introduced to investors in China through an innovation competition called “InnoStars.” Selected firms attain access to pitch their ideas for commercial use in front of interested Chinese investors. What they gain are capital and more importantly the investors’ network and resources in China. This model could be applied not only to Houston but also to other cities in the United States and reversely to Chinese startups. Increased engagement helps Chinese investors understand the U.S. corporate culture and regulations, which forms a virtuous cycle for future cooperation.

An alliance between the United States and China can significantly benefit the global community by orchestrating growth of technology innovator enterprises. Essentially, the long-term interest of the China and United States do not have to clash, as business investment circumvents the contentious topics through the construction of mutual interests and therefore sustains a more stable world economy.

Ruolin Zhao is a junior at Georgetown University (SFS'19) majoring in international political economy.