U.S. Firms Fret Over China Debt, Investment Rules

Feb 12, 2014

U.S. Firms Fret Over China Debt, Investment Rules

U.S. companies that do business in China are worried about investment rules that limit their growth there, as well as about the repercussions of rising levels of debt in the world’s second-biggest economy, a U.S. business group said Monday.

Businesses are hoping more than anything else that renewed efforts to conclude a bilateral investment treaty between the U.S. and Beijing will eventually give certain industries easier access to the Chinese market, according to a list of priorities that the U.S.-China Business Council planned to distribute to government leaders Tuesday. Secretary of State John Kerry may discuss the investment treaty, as well as regional security concerns, during a visit to Beijing in coming days.

American and Chinese officials said last year that they had agreed to negotiate a treaty with the understanding that businesses would have unfettered access to all sectors except those included in a yet-to-be-determined “negative list.” Officials have met to work on the framework but have announced little progress.

Global businesses have rapidly expanded trade with China, buying and selling hundreds of billions in goods. Still, many businesses want to be able to open wholly owned units in the country within industries that don’t allow majority ownership by foreigners. Local presence is especially important in the services industries, where the U.S. has a surplus with its trading partners and a perceived global advantage.

“Its kind of hard to sell insurance in China from New York City,” said John Frisbie, president of the U.S.-China Business Council, which includes more than 200 American economies that do business in China. Chinese businesses have invested as little as $20 billion directly in the U.S economy, while U.S. direct investment in China is estimated at $70 billion, he said.

China is seeking to rebalance its economic strategy away from export-dependent expansion and toward increased domestic consumption. Some worry that the effort to switch gears will endanger rapid growth.

Asked what U.S. business leaders worry about most in the Chinese economy, Mr. Frisbie pointed toward debt levels. China’s government is gearing up for a spike innonperforming loansendorsing a range of options to clean up the banks and experimenting with ways for lenders to squeeze value from debts gone bad.

“There’s a concern that debt levels are growing and how the authorities may be able to manage that,” Mr. Frisbie said. Efforts to slow credit growth could have a significant impact on businesses, he said.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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