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1 [1] (January 3, 2023)

handle is hein.crs/govejzs0001 and id is 1 raw text is: Cc'ngressbonaI Research Servtce infkrring L I leiltive debasn c -. 1914 0 Updated January 3, 2023 China's Global Investments: Data and Transparency Challenges During the past 20 years, the People's Republic of China (PRC or China) has significantly increased its investment overseas. In 1999, China launched its Go Global Strategy to support the expansion of Chinese firms abroad and make them more globally competitive. Since then, these firms- many of which are closely tied to the PRC government- have acquired foreign assets and pledged billions of dollars to finance infrastructure abroad. Many in Congress and the Biden Administration are focusing on the critical implications of China's growing global economic reach for U.S. economic and geopolitical strategic interests. International analysts are divided on the nature of Chinese activities. Some argue that these activities are primarily commercial. Others contend that this surge in global economic activity is largely directed and funded by the state as part of a concerted effort to bolster China's position as a global power and support PRC industrial and foreign policy objectives. A number of U.S. policymakers also have grown concerned about the terms of China's economic engagements and how PRC overseas lending may create unsustainable debt burdens for some countries. There is also concern that the bulk of China's lending supports commercial projects that benefit the PRC state firms that often implement them, sometimes to the disadvantage of host-country businesses and workers. Data limitations, combined with the number of unknown variables that drive China's foreign economic policy decision-making processes, can affect how Members of Congress perceive and address the challenges that China's overseas economic activities pose to U.S. and global interests. These limitations and uncertainties also complicate efforts to understand trends and assess the ways in which China's global economic reach may differ from that of the United States. Data Limkniation s A major challenge when researching global investment is the accuracy, completeness, and timeliness of data and information. While this challenge is not unique to projects involving PRC actors, it is exacerbated by the nature of many Chinese projects and loans, whose terms are not always publicly available or transparent. No comprehensive, standardized, or authoritative data are available on all PRC overseas economic activities-from either the PRC government or international organizations. Numerous think tanks and private research firms have developed datasets to track overseas investment, loans, and grants by PRC-owned firms and institutions using commercial databases, news reports, and official government sources, when available. These datasets often record the value of projects, loans, and grants when commitments or pledges are publicly announced (e.g., at press conferences). However, many of these deals may never be formalized, and if they are, project and loan details may change, and projects may not always come to fruition for various reasons (e.g., changing economic and political conditions, or concerns about sovereignty, debt structure, or environmental impact). China's Official FDI Data China's official foreign direct investment (FDI) statistics are compiled by the Ministry of Commerce and the State Administration of Foreign Exchange, using different criteria. While both agencies are supposed to reconcile their figures in annual revisions, discrepancies in the total amounts reported are common and sometimes significant. In addition, much of China's official outbound FDI has traditionally been registered in Hong Kong, the former British colony that has been a Special Administrative Region of the PRC since 1997, or in tax havens, such as the Cayman Islands or British Virgin Islands. Despite these limitations, figures derived from such data trackers often drive the policy debate in the absence of official data sources. U.S. policymakers may rely on them to assess the overall scope and magnitude of Chinese activities, making it important to recognize the limitations of existing databases. While they might be valuable and informative, they may also provide vastly different figures. Comparability challenges also may arise when trying to differentiate between overlapping loan, investment, and construction projects, since most datasets only capture a certain type of activity. PRC firms often use holding companies and offshore vehicles to structure their investments. Certain practices can make it difficult to track and disaggregate investments accurately. These practices include round-tripping (the practice of finrns routing funds to themselves through localities that offer beneficial tax policies or special incentives); trans-shipping (the practice of finrns routing funds through countries that offer favorable tax policies to later reinvest these funds in third countries); and indirect holdings (e.g., holding shares in an intermediate company that is a direct or indirect shareholder of the operating company). PRC restrictions on capital flows may further complicate data challenges. Some domestic investors reportedly rely on the schemes outlined above to take advantage of favorable conditions granted only to foreign investors. Transparen cy C hallenges In addition to data reliability and comparability issues, it is not always possible to determine if an asset or project is wholly or partially owned, financed, built, or operated by a PRC entity. Thus, lack of consistent, disaggregated, and detailed information limits the proper assessment of the size, scope, and implications of these activities. Moreover,

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