Trade agreement signed with California

Six local Chinese govts commit to growing links with Golden State

Despite various restrictions put in place by the United States federal government, China's investment into the country is expected to pick up in years to come, especially in the new energy and infrastructure sectors, after six Chinese local governments and California signed an agreement on Wednesday to increase trade and investment links.

The Ministry of Commerce will help promote Chinese investment in the US, and business exchanges between China's local governments and the US states, said Vice-Minister of Commerce Wang Chao during a meeting in Beijing.

The two countries have signed an understanding to establish the China Provinces and US California Joint Working Group on Trade and Investment Cooperation.

The six Chinese provinces and municipalities involved in the working group include Shanghai, Jiangsu, Shandong, Guangdong and Chongqing.

According to the Asia Society of the US, Chinese cumulative investment in California is worth $1.4 billion, the highest of any state in the US.

"California could get new investment worth hundreds of billions of US dollars from China by the end of 2020," said Wang.

The two-way understanding is a direct result of an official visit last year to California — the biggest state economy in the US — by then Vice-President Xi Jinping, during which the two sides pledged to strengthen bilateral trade and investment and explore new ways to strengthen China-US relations.

"It (the working group) is an important part of implementing the consensus that the two countries reached during that visit," Wang said.

More than 70 US companies from California and around 100 Chinese entrepreneurs attended Wednesday's business exchange conference.

But the new understanding also comes at a time when Chinese companies have been continuously challenged by investment barriers put up by the US federal government, for what it claims are political and national security reasons.

In October, two members of the US House of Representatives Intelligence Committee accused two Chinese telecom equipment companies — Huawei Technologies Co and ZTE Corp — of posing a potential national security threat to the US.

A month earlier, US President Barack Obama issued an executive order for Chinese-controlled Ralls Corp to divest its interest in four wind farm projects, located near a US Navy weapons-testing facility in Oregon.

"Economic and trade relations are the most important parts of the positive push for China-US relations," said Wang.

"The Chinese local governments and the US states show strong willingness, and are highly motivated to enhance economic and trade relations," he said.

In 2012, China-US trade reached $484.7 billion, close to 200 times more than when the two established diplomatic ties.

China's cumulative outbound direct investment in the non-financial sector in the US reached $10 billion by the end of 2012, while cumulative US direct investment in China stood at $70 billion.

Dominic Ng, chairman and chief executive officer of EastWest Bank, said: "The US restrictive measures against Chinese investment is only one side of the issue; the majority of American state governments are more than welcoming to Chinese investment, as they want jobs and economic growth.

"We see golden opportunities in the next decade for China's investment in the US."

Jerry Brown, governor of California, agreed, adding that the US government has its own foreign policy, which has nothing to do with those of state governments.

"We are totally open to China — it's about jobs, and it's about investment," said Brown.

California is the largest state economy in the US by terms of economic size, and the ninth-largest in the world.

It is a big agricultural state, while its iconic Silicon Valley is considered the largest concentration of top technology companies in not only the country, but globally.

"Chinese local governments are willing to develop investment cooperation with California in sectors including infrastructure, energy, agriculture, manufacturing, biological medicine and tourism," added Brown.

In 2012, California's exports to China were worth $14 billion, a 300 percent growth from 2000 and the highest of any US state.

Some US companies have been vociferous in their complaints about doing business in China, highlighting market access and intellectual property rights, in particular.