President Donald Trump has pledged to create new, good-paying jobs for millions of American blue-collar workers, principally through a still largely undefined plan to inject $1 trillion in both public and private funding into America’s infrastructure. He has promised a program of “national rebuilding” to be carried out “with American hands and American labor.”
It’s a great idea, but there’s a major problem. There is not enough ready American capital to hire all the American hands and American labor that would be required to realize this vision. That capital may have to come from somewhere unexpected: the Chinese private sector.
Even with a major infusion of capital from the U.S. private sector—and even assuming our dysfunctional permitting system is greatly streamlined—America will not be able to marshal sufficient resources over the next several years to put a perceptible dent in the estimated $4.5 trillion in needed investment for our infrastructure.
That’s where China comes in.
Some may justifiably wonder whether Chinese investment is feasible on security, economic, and political grounds.
The security bar is easily cleared. The Committee on Foreign Investment in the United States, the principal government interagency body charged with vetting foreign investments into the U.S., governs only those investments in which the foreign investor seeks an ownership stake (and, specifically, a majority ownership stake) of the entity in question. Structuring private Chinese investment in U.S. infrastructure as loans nullifies this set of concerns.
But is there is a business case for Chinese private investors to finance our infrastructure projects? Yes. While it is true that infrastructure projects tend to generate returns in the low single digits, there are reasons that such projects and returns are attractive to potential Chinese investors. The infrastructure market offers both diversification and stability relative to the existing portfolios of these potential investors. Moreover, Chinese investors view this kind of investment as having a double bottom line: It can help create a more politically sustainable economic partnership between China and the U.S., and it can transform China from being perceived in the U.S. as a job killer to a job creator.
In terms of the politics, the obvious criticism of this type of initiative would be that it would sell out America to China. The only problem with that criticism is that under the vision laid out here, nothing is being sold. Rather, Chinese private loans, along with other financing, would put American hands and American labor back to work rebuilding our roads, railways, and ports. Political leaders—at all levels and on both sides of the partisan aisle—would come away from this type of arrangement winners.
Texas provides arguably the most obvious and urgent opportunity for mutually beneficial U.S.-China infrastructure investment collaboration. The devastation that Hurricane Harvey brought to Houston and surrounding communities was staggering and could take decades to recover from fully. Bringing Chinese private capital to bear on this economically vital region’s recovery would generate several positive consequences.
First, it would help the people of the affected region more expeditiously get back on their feet economically and otherwise. This matters to China in a very direct way because Texas is one of the largest state traders with China, and Houston is the state’s (and the Gulf Coast’s) largest port. Second, it would put the greater Houston area even more squarely on the map of potential Chinese investors and Chinese leadership, potentially generating additional business deals that could generate significant employment for Texans across the region. And third, such an overture could help move U.S.-China relations in a direction that is beneficial for both countries.
Welcoming major Chinese investment in U.S. infrastructure would go a long way toward advancing a top presidential policy priority. It could put millions of American blue-collar workers back to work in solid jobs and deepen and stabilize U.S.-China relations in ways that are consistent with our law and policy. The jobs need to be American; the capital that creates them does not.
David J. Firestein is the founding executive director of the China Public Policy Center in the LBJ School of Public Affairs at The University of Texas at Austin.