5 hurdles exist for Chinese firms to fund US needs
Print Edition
Capital funding need for US infrastructure provides great chances for Chinese participation, but five major commercial and political hurdles exist, the US Chamber of Commerce said in a report.
The report listed national security concerns, adverse reactions to foreign ownership, quality control and product safety, inadequate legal remedies and after-sale service as the five major challenges that Chinese investors should anticipate and develop strategies to address.
First of all, Chinese ownership of existing infrastructure projects or businesses may face scrutiny from the Committee of Foreign Investment in the United States or political opposition, the report said. In particular, investment in the electricity grid, upstream and midstream oil and gas assets, airports, and seaports are likely to be viewed as highly sensitive.
Secondly, Chinese investors may generate strong local adverse reactions to foreign ownership, which often center on concerns that decisions affecting the public will be left in the hands of foreign powers, it said.
Thirdly, high-profile defective product cases in recent years may prompt concerns about quality control and product safety, according to the report.
Fourthly, there may be concerns about legal remedies against Chinese suppliers in case of damage from faulty products, given the limited legal cooperation between the US and China, it said.
Lastly, Chinese firms may lack established capabilities to provide after-sale service and maintenance as they mostly served overseas markets through exports, it added.
One of the report’s leading authors, Daniel Rosen, said Chinese firms that aim to expand international presence can improve their managerial experience and converge with international legal norms via investment in the US market.
The report estimated that a minimum of more than US$8 trillion in new investment will be needed in US energy, transport, and drinking water and wastewater infrastructure from 2013 through 2030, or about US$455 billion per year.
Investment in energy infrastructure accounts for 57 percent of the total projected need, followed by 36 percent for transport and 7 percent for water-related infrastructure, it said.
In the context of significant pressure on US federal, state and local budgets, substantial private capital will be necessary to finance the new infrastructure investments, it added.
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