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Japan’s investment in the US is 50 times greater than China’s. But Chinese companies can change that

For Chinese businesses eyeing the US market, four more years of President Barack Obama means continued head-winds and increased scrutiny. But opportunity still exists, especially for those willing to rethink the rules of engagement. Recent research indicates that the US could attract up to $400 billion in new investment from China by 2020. But the Obama administration and the US Congress have proven a considerable roadblock to Chinese businesses trying to break into the potentially lucrative US market.

Whether it’s been the Department of Commerce slapping anti-dumping tariffs on Chinese solar panel manufacturers, congressional investigations surrounding Huawei and cybersecurity, or continued pressure on the Chinese government to revalue its currency, Washington, D.C. is definitely not “open for business” when it comes to Chinese multinationals.

During the last presidential debate before his re-election, Obama referred several times to China as an “adversary,” a noticeably negative shift in tone and a hint of what Chinese businesses can expect in his second term. His agenda also includes finalizing the Trans Pacific Partnership negotiations, which do not include China, and launching a new Trans Atlantic trade initiative with the European Union—both of which would give a competitive marketplace advantage to other Asian and European companies in the United States. There is a general sense that the business environment will get worse before it gets better.

Chinese investment in the United States is still low compared to other countries. Japan’s foreign direct investment (FDI) in the US was $289 billion in 2011. By contrast, China’s FDI stood at $6.3 billion for the first three quarters of this year, and while it is on track to hit an all-time high this year, the gap is big.

But even that seemingly good news is overshadowed by the antagonistic tone inside the Beltway. A Congressional advisory panel, the U.S.-China Economic and Security Review Commission, in mid-November called for tighter screening of investment by state-owned Chinese companies, citing unfair competition.

“Growing Chinese investment may offer an important new source for U.S. job creation and economic growth, but it is too early to know whether the benefits will outweigh whatever longer-term economic costs Chinese state-owned and state-directed investments may bring,” the commission said.

Clearly, Chinese companies need to recalibrate, and approach entering the market differently than they have in the past, whether they are working behind-the-scenes through lobbying or going directly to the American public. Here are five recommendations for greater success:

  • Engage early and often: Huawei is the prime example of the need for Chinese brands to get ahead of market bias. The company arguably waited too long to engage with policy-makers in DC, where there is a strong perception, founded or not, that Chinese companies are directly or indirectly associated with the government or the military. Eventually, Huawei invested heavily in a lobbying effort, but it appears it was too little, too late. Understanding who, how and when to engage is critical.
  • Power in numbers: Instead of going it alone (or relying on their government), Chinese companies would be best served by pooling resources and building industry coalitions that advocate for the interests of a block of companies, not just of one. Some efforts in this direction are just beginning, but greater coordination and focus is needed to be successful.
  • Jobs, jobs, jobs: With the US political leadership still focused squarely on economic recovery, and specifically job creation, Chinese companies need to align their communications with the creation of American employment and economic development. Companies have good stories to tell on this front, and therefore an opportunity to build goodwill with US communities and their legislators.
  • Social impact: Aside from jobs, there are also opportunities for Chinese companies to be seen as valued members of the American social fabric. Being seen as good neighbors through corporate social responsibility efforts could go a long way to creating a beneficial brand halo.
  • Don’t skimp: Chinese companies have traditionally spent little on brand communications and often on a reactive basis only after issues arise. They will need to invest (before issues arise not after) to be competitive globally and especially in more developed markets like the United States, where competition for brand loyalty is much fiercer than at home. Positive brand perception does not occur in a vacuum.

At least one company has managed to learn these lessons already: China National Offshore Oil Corp. (CNOOC). In their first attempt to enter the market they tried to buy an American oil company, Unocal, without proper due diligence vis-a-vis the predictable US government’s foreign investment concerns. More recently, in buying resource-rich property in the United States, CNOOC both did their homework and engaged in strong government and public relations.

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