The China‑U.S. Industrial Cooperation Partnership, a $5 billion fund led by China Investment Corporation (CIC) and American investment bank Goldman Sachs, makes up a sizable chunk of the $9 billion in investment and trade agreements announced during President Trump’s recently-concluded “state visit plus” to China. While the partnership is aimed at bolstering Trump’s domestic manufacturing drive, there is a risk of drift toward assisting Chinese efforts to use investment to acquire advanced technology. It is possible this is viewed by Beijing as a useful way to achieve these and related objectives under the Goldman name, in a manner that is less likely to be targeted for scrutiny by the Committee on Foreign Investment in the United State (CFIUS).
According to CIC and Goldman, the fund will have a mandate to promote investment in U.S. manufacturing, industrial, consumer, and healthcare industries. It also aims to promote market access for U.S. firms in China and improve the balance of the bilateral trade relationship.
The overall purpose of the fund is to generate private equity investment in U.S. companies. While this is framed as beneficial to U.S. manufacturing and industry – two focuses of Trump’s domestic policy – Chinese companies are likely to blend into this framework efforts to acquire technology consistent with its own industrial policy priorities. This could ultimately run up against U.S. concern over unfair trade practices that weaken the competitive advantage of the United States and likely once again raise the attention of CFIUS and its advocates.
Indeed, Growing scrutiny from review bodies such as CFIUS has tempered ease of access for Chinese investment in the U.S., with new Chinese transactions for the year to date lower than any year since 2012. Directing investments through Goldman Sachs may help with anticipating and navigating CFIUS-related challenges, but is unlikely to succeed in overcoming the breadth of bipartisan political support that currently exists for CFIUS and its mission. In other words, we are not optimistic that that this fund will provide much shelter.
The other dimension to this arrangement, as stipulated in the CIC-Goldman press release, is the claim that the partnership will ease market access for U.S. firms in China. Perhaps there is hope that, if China can get some assistance in tempering negative U.S. reaction to its investment activity in the U.S. and abroad, that this will usher in a new era of opportunity for U.S. entities in China. The only immediately obvious concession from the Chinese side, however, is an impending removal of the 49% foreign ownership cap in certain financial industry investments. There is little else explicitly stated as to how this opening might take place.