Chinese investment in U.S. infrastructure faces five challenges: report

0 Comment(s)Print E-mail Xinhua, October 24, 2013
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Capital funding needs for U.S. infrastructure provides great chances for Chinese participation, but five major commercial and political hurdles exist, the U.S. Chamber of Commerce said in a report on Wednesday.

The report listed national security concerns, adverse reactions to foreign ownership, quality control and product safety, inadequate legal remedies and after-sale service as the five major challenges that Chinese investors should anticipate and develop strategies to address.

First of all, Chinese ownership of existing infrastructure projects or businesses may face scrutiny from the Committee of Foreign Investment in the United States or political opposition, the report said. In particular, investment in the electricity grid, upstream and midstream oil and gas assets, airports, and seaports are likely to be viewed as highly sensitive.

Secondly, Chinese investors may generate strong local adverse reactions to foreign ownership, which often center on concerns that decisions affecting the public will be left in the hands of foreign powers, it said.

Thirdly, high-profile defective products cases in recent years may prompt concerns about quality control and product safety, according to the report.

Fourthly, there may be concerns about the availability of legal remedies against Chinese suppliers in the case of damage from faulty products, given the limited legal cooperation between the U. S. and China, it said.

Last, Chinese firms may lack established capabilities to provide after-sale service and maintenance, as they mostly served overseas markets through export, it added.

One of the report's leading authors, Daniel Rosen, told Xinhua that Chinese firms that aim to expand international presence can improve their managerial experience and converge with international legal norms via investment in the U.S. market.

The report estimated that at a minimum more than 8 trillion U.S. dollars in new investment will be needed in U.S. energy, transport, and drinking water and wastewater infrastructure for the years 2013 through 2030, or about 455 billion dollars per year.

Investment in energy infrastructure accounts for 57 percent of the total projected need, followed by 36 percent for transport and 7 percent for water-related infrastructure, it said.

In the context of significant pressure on U.S. federal, state and local budgets, substantial private capital will be necessary to finance the new infrastructure investments, it added.

Given China's external portfolio and growing capabilities of Chinese firms in infrastructure-related activities, it will be a particularly interesting opportunity for Chinese investors and suppliers, said the report. Endi

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