Observations from Discussions with Chinese CEOs
Since starting my own global consulting practice FAO Global, I have talked to many Chinese investors and business owners who want to enter the U.S. market but are concerned over the geopolitical and market trends in the United States. Companies that want to invest in non-technical or national security sectors are unsure of how their venture will be perceived by U.S. authorities.
Below are three areas of concern we see when discussing opportunities in the U.S. with Chinese investors.
Concern #1 – Am I allowed to invest based on CFIUS?
FAO Global has seen many Chinese investors concerned about becoming targets of an overarching anti-China movement in the United States. The passing of the Foreign Investment Risk Review Modernization Act (FIRRMA) in 2018 gave new authority to the Committee on Foreign Investment in the United States (CFIUS)), which has been used to regulate a much broader swath of overseas business ventures. Administrators of CFIUS have acknowledged that many Chinese ventures are not approved, further creating an environment that discourages participation.
The lack of public oversight and due-process along with expanding coverage of international ventures is a scary thought, even for U.S. companies seeking foreign investment or partners. It is likely that many firms are already in violation of these new regulations and administrators in CFIUS do not seem to acknowledge real business concerns, since they are mainly focused on national security concerns. While internal debate is likely occurring, the opacity of the process only creates anxiety and concern. This not only impacts Chinese investment but European, Latin America, and other regions as well.
Concern #2 – The U.S. government is arbitrarily targeting prominent & competitive Chinese companies for political purposes (i.e. Huawei)
A relevant topic being considered by potential Chinese investors to the U.S. is the current sanctions. The recent actions by the United States against Huawei are argued by many to be much more politically motivated than based on legal precedence. While Huawei was found to have violated sanctions and is being pushed out of the U.S market due to concerns over Chinese influence, many Chinese do not understand and/or agree with the U.S. assertions. This also translates to consumers and legislators in other countries as well.
Chinese investors or business professionals are perceiving the U.S. as not fostering open competition. To many they do not welcome in the U.S. and if you make a competitive or superior product in China and want to sell into the U.S. While those who operate and are familiar with the U.S. may not have these viewpoints, the information is not flowing back to investors on the mainland.
Concern #3 – If I invest now, I may be pushed out because of the changing definition of national security
This is a concern for many, including U.S. firms and start-ups seeking investment. The loosely defined term of national security as it relates to emerging and future technologies only makes investment into cutting edge industries is becoming more difficult to predict. Administrators from the justice department contend that a broad definition is better to address national security concerns. This creates the perception that laws may change arbitrarily. The rule of law has been a defining characteristic of the U.S. business environment and lack of belief from some that this system is impartial only creates uncertainty and hesitation.
About the Author
Brandon Hughes is a U.S. businessman and China Strategist with over a decade of experience focused on emerging markets. He is currently the Founder/ CEO, and Principle consultant at FAO Global which provides bespoke data analysis and management consulting services to firms investing & operating in China & emerging markets.
Brandon brings over a decade of experience working in international markets from the public, non-profit, and private sectors. He holds an L.L.M. from Tsinghua University (Asia#1) and a B.S. in International Business from UNLV. He is currently completing a joint MBA through Columbia University, London Business School, & Hong Kong University.
