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Staff Paper
A U.S.-China Bilateral Investment Treaty (BIT) is unique among other existing BITs insofar as it will have to balance the interests of two world powers that are both capital-importing and capital-exporting nations. It will not only determine future investment relations between the world’s two biggest economies, but will also set the precedent for U.S. investment relations with other major developing countries. While a U.S.-China BIT could potentially unlock sizable benefits, a number of significant challenges—many of which are unique to China’s involvement—complicate the debates around a prospective U.S.-China BIT. This report briefly summarizes each country’s history with BITs, identifies potential challenges in moving forward with negotiations, and highlights potential implications of the U.S.-China BIT for the United States. Drawing on the 2012 U.S. Model BIT, the evolution of China’s BIT practice, and China’s 2012 BIT with Canada, this report concludes by discussing a number of questions U.S. policymakers should consider.
Staff Paper
Chinese tourism to the United States has expanded rapidly over the past ten years. From 2005 to 2015, Chinese tourism spending in the United States has increased eight-fold, and in 2015 contributed $27 billion to the U.S. economy. Today, tourism constitutes a significant part of the United States’ exports to China, making up 57 percent of U.S. service exports to China in 2015 and 12 percent of U.S. exports to China overall. This increase has been driven by rising Chinese incomes which have made China the largest source of international tourists in the world. While many Chinese travel to the United States for traditional tourism, an increasing number of Chinese students travel to the United States for secondary and tertiary education, with China now contributing more students to the United States than any other country. As Chinese tourism has increased, Chinese investment in U.S. hotels and hospitality facilities has grown by a factor of 9 from 2013 to 2015 following looser Chinese rules on outbound investment. This paper examines the rise in Chinese tourism to the United States and Chinese investment in the U.S. hospitality sector and the consequences of these trends for the United States.
Contracted Research
The report examines the Chinese government’s actions to promote the use of its currency, the renminbi (RMB), in the global monetary system as a payment currency for cross-border trade and financial transactions, a vehicle currency for foreign trade and international capital transactions, and a reserve currency. The report analyzes the potential effects of the rising prominence of the RMB on the financial clout of the United States and the U.S. dollar’s role in denominating international trade transactions and settling cross-border financial transactions.
Issue Brief
After the stock market turmoil last August, Chinese regulators were hoping for a peaceful start to the year, preparing to wind down the ban on sales for big shareholders and launching a new mechanism (a circuit breaker) designed to prevent dramatic falls on par with those seen last year. The plan backfired. China’s Shanghai and Shenzhen stock markets crashed on January 4, the first day of trading, followed by another crash on January 7; in both cases, the circuit breaker halted trading. The combined rout erased more than $1 trillion of value. The government’s attempts to stem the meltdown only worsened the situation, confusing investors and raising fresh doubts over the ability of the Chinese government to manage a slowdown in the economy. They also exposed the contradiction inherent in the Chinese Communist Party (CCP) leadership trying to introduce market-oriented policies for the broader economy while maintaining control over the composition and behavior of the Chinese stock markets—an approach that leads to greater volatility and moral hazard.
Staff Paper
Despite China’s rapidly growing overseas engagement and recent multilateral initiatives, the country still receives development finance from a variety of governments and institutions. From a development perspective, China thus challenges convention and, like other middle-income countries, straddles the divide between a developing nation requiring external assistance and an emerging power assuming global leadership roles. This report examines China’s concurrent positions as a recipient and a provider of development finance, evaluating the objectives driving global finance flows, and assessing the impact of these flows on U.S. economic and diplomatic interests.
Staff Paper
This report examines recent trends in Chinese investment in the United States, drawing on interviews with state officials. It begins with a general review of Chinese outbound investment patterns, and then looks in more detail at U.S. real estate, industry, and investment promotion. The paper identifies important implications for the United States, including the potential to strengthen regulation of the EB-5 visa program and improve federal support of state efforts.
Staff Paper
In May 2014, Alibaba, China’s leading e-commerce website, filed for a U.S.-based initial public offering (IPO) in what is expected to be one of the largest in U.S. history. The highly anticipated IPO will be just one in a recent wave of Chinese Internet companies launching IPOs in the United States. The trend has raised some misgivings among U.S. regulators about the corporate structures of these companies. To bypass Chinese government restrictions on foreign investment in the Internet sector, Chinese Internet companies use a complex and highly risky mechanism known as a Variable Interest Entity (VIE).
An addendum was added to this paper on September 12, 2014.
Issue Brief
Bitcoin is changing the way the world thinks about money, and its impact is growing, especially in the United States. The driving force behind Bitcoin’s explosive growth in 2013 was the entry of the Chinese market, while Bitcoin’s subsequent slump in 2014 is largely derived from prohibitive measures issued by China’s central bank. If Chinese authorities continue their crackdown on Bitcoin, the global market and, by extension, the U.S. market, may be severely impacted.
Issue Brief
This paper looks at China's foreign exchange reserves and holdings of U.S. Treasuries, and examines China’s efforts to diversify its investments
