A report by the US Chamber of Commerce called 'From International to Interstates: Assessing the Opportunity for Chinese Participation in US Infrastructure' has found that the pressing need for capital to modernise US infrastructure is creating substantial new opportunities for Chinese investors. In fact, according to US Chamber of Commerce president and CEO Thomas J Donohue, two-way infrastructure investment has emerged as one of the most promising opportunities to spur economic growth and job creation in both the US and China.
“This type of investment would benefit both of our countries, strengthening our relationship and enhancing global stability and prosperity,” he said.
The US is poised to undertake the most significant expansion and modernisation of its infrastructure since the 1950s. Unlike previous such booms, this new period is taking place in the context of significant pressure on federal, state and local budgets, suggesting that substantial private capital will be necessary to finance the new infrastructure investments.
This expansion is also taking place in a dramatically changed global economy that boasts new players in global trade and investment. The most important new player is China, the US's second largest goods trading partner and a country with a large and growing pool of available capital.
The report, commissioned by the US-China CEO and Former Senior Officials’ Dialogue, emphasised that the pressing need for resources to modernise US infrastructure is creating opportunities for Chinese investors to act as providers of capital, goods and services in areas such as civil engineering, architecture, construction and contract and life-cycle management.
“At a minimum, we estimate that more than $8000bn in new investment will likely be needed in US transportation, energy and wastewater and drinking water infrastructure from 2013 through to 2030 – totalling some $455bn per year,” said Mr Donohue. “In reality, a much higher [level] of investment will likely be necessary.”
Investment in energy infrastructure accounts for 57% of the total projected requirements, followed by 36% for transport and 7% for water-related infrastructure. Making the most of these opportunities will require navigating the legal, regulatory and political landscape in the US, the report warned.
“The infrastructure investment opportunities available to Chinese businesses are significant, but achieving them will likely be a complex undertaking,” said Mr Donohue.
The report advised Chinese parties looking to expand their participation in the sector to consider, assess and plan for these challenges, both on a project-by-project basis and in the context of a long-term strategy. It also suggested on developing strategies to address likely challenges, including national security concerns, adverse reactions to foreign ownership, quality control and product safety, after-sale service, inadequate legal remedies, and legal and regulatory requirements governing outbound investment from China.