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The China Checklist (Part I)

What are some common myths about U.S.-China relations?

June 4, 2009

What are some common myths about U.S.-China relations?

U.S. Treasury Secretary Tim Geithner concluded his maiden journey to China this week.

With Geithner reassuring China that its dollar assets are safe, back in the U.S. Congress, legislators have again proposed to take China to task for alleged currency violation.

With this as a backdrop, it is an opportune time to separate fact from fiction and highlight some key issues that define today's economic ties between the United States and China. Amid all the chatter surrounding one of the most important bilateral relationships in the world, all interested parties would do well to remember the following:

1. U.S. investment in China: It's not as much as you think.

The mainland, so goes the consensus, has become the "factory to the world," leaving U.S. workers to flip hamburgers.

Reality is quite different. U.S. foreign direct investment (FDI) in China has climbed during the past decade, but a little perspective is in order.

Takeaways

Trade figures alone — the favorite benchmark of global commerce — underreport and misrepresent the true balance of commerce between the United States and China.

China is not a unified market of 1.3 billion people, but a collection of markets with different dialects, varying levels of development and disparate per-capita incomes.

U.S. firms enjoy far better access to the Chinese market than their Chinese counterparts do to the United States.