The US is in the last stretch of a highly anticipated and highly important election season. In November 2012, the American public will decide whether to re-elect the current president, Barack Obama, or whether to send his challenger Mitt Romney to the White House.
Given the economic conditions in the US, it is no surprise that the American public and media seem fixated on a handful of domestic issues. And yet, developments on the international stage may ultimately provide an equally lasting impact on the US and global economy.
Chief among these trends is the recent tendency of Chinese companies to expand and invest abroad. Going global brings new challenges, especially for companies that have previously concentrated on the China market exclusively and can count on government support on their home turf in a market heavily regulated by the ubiquitous government. The environment in the US is very different.
We believe that the starting point for understanding the US as a destination for investment should be how the US views itself — just as American visitors to China are advised to understand the long-view of Chinese history in order to gain better perspective on current events.
The US is a different kind of nation than China. Its history as a state does not extend back for more than two millennia. It is very diverse — the proverbial melting pot of different ethnic, religious and racial groups.
From its founding, the US has been grounded on an openness to other nations and other cultures. The result is that a core part of American communities and the American workforce are immigrants, including many of Chinese descent.
With respect to foreign investment, the US works from a similar position of openness, embracing an open-door approach to foreign investment. Each American president since Ronald Reagan in the 1980s has made the case to the American public that foreign direct investment benefits the US and the global economy.
As China assumes global responsibilities and as Chinese companies pursue international ambitions, that dialogue may increasingly focus on issues of reciprocity. Speaking with respect to US policy towards China, a senior member of the US Treasury Department recently stated: “We are willing to make progress on these issues, but our ability to do so will depend on how much progress we see from China.”
Those principles are, of course, subject to both international diplomacy and legal regimes. A civil discussion on reciprocity will be a far cry from any perceptions that one country is trying to block the other’s economic progress and global investment. And, for Chinese companies looking to do business in the US, the law has independent importance that it is necessary to understand.
Two partners from O’Melveny & Myers have written a paper (available below) that provides an overview of key governance principles founded in the law and reviews the areas of US law that are most common to the plans of foreign investors, including the review of “national security” issues by the Committee on Foreign Investment in the US, pre-closing approval of asset acquisitions by antitrust agencies and application of US securities laws.
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About the authors
Li Qiang heads the O’Melveny & Myers office in Shanghai and specialises in cross-border transactions. Jon Sallet is a partner in the firm’s Washington DC office who specialises in antitrust and public-policy issues.