China wants to buy more than just beef and soybeans from the United States. The world’s second largest economy also eagerly wishes to greatly increase the import of American technology.
That’s the message from Tu Guangshao, vice chairman and president of China’s sovereign wealth fund, the US$814 billion-under-management China Investment Corporation.
"Faced with trade deficit with China, the U.S. should consider trying to increase exports to China. American exports to China has great potential…Besides beef and natural gas imports, the U.S. can still export a lot more to China such as in the tech sectors," Tu said at the Asian Financial Forum today in Hong Kong.
U.S. exports to China has been growing at the fastest pace among all major American trading partners in the past ten years. American goods exports to China totaled US$113 billion in 2016, increasing 114% during the period. American services exports to China stood at US$47 billion in 2015, up more than 400% from 2005 to 2015, according to data from the US-China Business Council.
Despite rapid American exports to China, the U.S. still has a large trade deficit with China. In 2016, that number was US$309.6 billion. Further more, U.S. exports to China have largely been in the agriculture sector, including soybeans and grains, as well as in the aircraft, machinery and vehicles sectors.
Tu acknowledges that importing U.S. tech to China faces great challenges. "But what I have heard is that the U.S. feels uneasy about exporting technology to China. In fact, there is no need to be so uneasy about it…Technology development is fast-paced and industries are rapidly evolving. If the U.S. has advanced technologies and can export them to China, it would help stimulate the American economy in return. Exporting technologies to China would help expand potential addressable market for (American companies)," the former vice mayor of Shanghai said.
The reality is that it is becoming increasingly difficult for Chinese companies to acquire U.S. technology. The Committee on Foreign Investment in the United States (CFIUS) has become more aggressive under President Trump, who blocked Chinese state-backed Canyon Bridge Capital Partners’ planned US$1.3 billion acquisition of U.S. chip maker Lattice Semiconductor Corp last September. Two weeks ago, Ant Financial terminated plans to acquire U.S. money transfer company MoneyGram after failing to obtain approval from CFIUS.
This may mean that Chinese companies will need to do smaller and earlier stage "tech transfer" type of deals, instead of large M&A transactions. Tu seems to suggest this as well. "We know that the U.S. has core interests and national security concerns, but there are many companies outside of these "restricted areas." There are many (purely) commercial and market-based technology that can be exported to China," Tu said. "It would not be beneficial for American companies to spend so much energy to develop (their technology) but not to expand their markets."
China Investment Corp has invested in a number of American technology companies. In March 2017, it reportedly acquired a minority stake via a US$100 million investment in American vacation home sharing giant Airbnb Inc. in 2017. The fund also participated in a US$181 million series C financing round in Unity Technologies, a San Francisco-based video game engine maker, in 2016.
Tu, who was appointed as China Investment Corp’s general manager in June 2016, also said that the Chinese sovereign wealth fund is expected to post a strong year for its 2017 investments supported by strong U.S. equities market. The fund may achieve over 16% of investment return on its overseas investments in 2017, compared to 6.22% in 2016 and a negative 2.96% in 2015, he revealed during the same occasion.