The U.S. should do more to lure Chinese investment by Nin-Hai Tseng @FortuneMagazine February 23, 2012, 5:07 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons Xi Jinping, the man with the money FORTUNE – Ireland’s public finances became so disastrous that it almost went bankrupt less than two years ago. But it still has a thing or two to teach the U.S. As the island nation tries to recover after being rescued with a multi-billion dollar international bailout, Ireland is welcoming Chinese investors. On Monday, Xi Jinping, who’s expected to be China’s next president, ended a three-day visit to Ireland. It was the only European Union country he visited on his world tour, which included a stop in the U.S. last week and continued with a visit to Turkey this week. And his visit came only days before Europe’s ongoing debt crisis, in particular Greece’s financial woes, drove a slew of heavy losses across the European banking sector. Ireland is positioning itself to become China’s gateway into doing more business in Europe. Though in the past the Celtic Tiger looked mostly to developed economies including the U.S. and Britain for potential investors, officials are now focusing more on emerging markets that aren’t nearly as saddled with debt. And China appears at the top of the list. “We had very fruitful discussion in our meeting, and we also concluded a number of important memoranda of understanding between Ireland and China in the areas of investment, education and business,” Irish Prime Minister Enda Kenny said. The tone is far different from that of the U.S., where officials greeted Xi’s stop last week with hesitation and a list of grievances, ranging from China’s artificially depressed currency to human rights abuses. During a toast at a State Department lunch, Vice President Joe Biden declared the U.S. could cooperate with China “only if the game is fair.” His remarks come as the U.S. harden its language toward China in recent months amid an election year. MORE: China’s Facebook basks in the glow Needless to say, such concerns aren’t something to ignore, but the rhetoric does little to encourage Chinese companies to pour investments into the U.S. “Many Chinese executives and government officials remain frustrated by the political controversy or regulatory resistance engendered by a few investments,” wrote David Marchick, a managing director with private equity firm Carlyle Group, in a policy memo published by the Council of Foreign Relations ahead of Xi’s U.S. stop. Marchick added that Chinese executives often point to memories of Chinese National Offshore Oil Corporation’s failed attempt to acquire California-based Unocal Oil Company, which Chevron CVX acquired in 2005. “Consequently, many Chinese executives believe the United States is unwelcoming of Chinese investment, even though the vast majority of Chinese investments in the United States have either been approved or have not required any approval,” he notes. To be sure, Chinese investments into the U.S. have steadily risen over the years as the East Asian giant opens its economic doors. In 2011, the world’s second-largest economy invested about $5 billion into the U.S., according to preliminary tallies by New York City-based economic research and advisory firm Rhodium Group. Research Director Thilo Hanemann notes that this is about the same level as the previous year, perhaps slightly less. The flat figure doesn’t necessarily imply that China views the U.S. as any less attractive, but rather that investments in Europe has carried greater momentum. As Europe’s ongoing debt crisis unfolds, Chinese investors have increasingly looked to Portugal, Spain, Greece and others for opportunities as debt-troubled governments sell off public assets. In 2011, China invested more than $9 billion in Europe, according to Rhodium. But Ireland is doing more than banking on public assets. And this should probably come as little surprise, given that the country previously built up its economy on exports and foreign investments. Many U.S. multinationals, from Pfizer PFE to Facebook, have based their European headquarters in Ireland. And Ireland hopes Chinese companies might follow, with the allure of its low corporate tax rates and relatively well-educated workforce of English speakers. MORE: Why China’s housing market will slow, not collapse Indeed, the competition for Chinese investments is ramping up. And it’s hard not to wonder if the U.S. might be mistaken for not competing better with the Irish and others. Admittedly, Ireland is in a much tougher financial spot than the U.S. and eager to lure all the investment it can. Its unemployment rate is running at a high 14%, after having been battered by a property market crash and a banking crisis. Ireland is turning it around. In recent months, investors have signaled renewed confidence that Ireland could overcome its financial problems better than the rest of Europe. Irish 10-year bond yields have slid to 8.2% since last July’s peak of about 14% partly on better than expected growth for 2011 (driven largely by exports). What’s more, in January, Ireland returned to the international bond market for the first time since it was forced to accept a mega European Union-International Monetary Fund bailout package in November 2010. The Celtic Tiger isn’t just narrowing its focus on China, however. Earlier this month, Ireland announced it would cut the amount of tax levied on some highly skilled foreign workers in an effort to attract new investments. Indeed, Ireland realizes its economy at home is weak and has turned to investors abroad to help return it to its heydays. Instead of falling on protectionist rhetoric, might the U.S. follow?