Global Atlanta | October 23, 2014
Coca-Cola CEO among execs urging investment treaty with China
by Trevor Williams
Coca-Cola Co. CEO Muhtar Kent, a former president of the U.S.-China Business Council, is among a group of 51 CEOs from top American corporations who are urging President Barack Obama to prioritize a bilateral investment treaty with China.
The CEOs on Oct. 15 signed a letter informing Mr. Obama that the business community would fully support him in making the treaty a primary policy objective of his trip to China in November.
The two sides have been in talks on the treaty, which would outline rules and open sectors for investment in each other’s economies, for the past two years. Proponents hope the U.S. can persuade China to reduce its “negative list,” the list of sectors where full foreign ownership is excluded.
"Investment barriers are market access barriers, plain and simple,” reads the letter. "If China can significantly reduce its negative list and open markets to American manufacturers, agriculture producers, and service providers, you will find the business community fully engaged and supportive of your leadership to gain Senate approval of the treaty.”
Chinese President Xi Jinping said at the 2013 Strategic and Economic Dialogue in Washington that the two sides should begin negotiations toward the treaty "as soon as possible.”
But the timing might be tough with the U.S. midterm elections coming up. In an Oct. 23 note, the Rhodium Group consultancy, which tracks Chinese investment in the U.S., said some Democratic candidates had begun to urge tighter restrictions on foreign investment in the U.S., directly referencing a few high-profile Chinese acquisitions this year: Shuanghui International’s $7.1 billion purchase of Smithfield Foods and Chinese PC giant Lenovo’s $2.1 billion deal to buy IBM’s low-end server business.
Both were approved by the Senate’s Committee on Foreign Investment in the U.S., or CFIUS, the body set up to make sure that outside investments don’t threaten national security. That process would stay in place under a bilateral investment treaty.
It’s U.S. firms that would stand to gain more under a treaty, U.S.-China Business Council President John Frisbie has said. U.S. firms mainly go to China to make money there, not to outsource production for goods sold back in the U.S.
"China maintains ownership restrictions on American and other foreign companies in about 100 sectors, including manufacturing, services, energy, and agriculture. American ownership in auto plants is limited to 50 percent. Life insurance - 50 percent. Cloud computing - 50 percent. Soybean oil (used in kitchens in every Chinese home) 49 percent. The list goes on. These ownership barriers keep American companies from reaching more customers in China.” Mr. Frisbie wrote.
Coke has more than 40 bottling plants around China and has announced plans spend $4 billion in the country between 2015-17 in its third largest market.
View the letter here.