The Chinese consume tons of pork every day -- a market that foreign investors can't access in earnest. Reuters

BEIJING — Chinese companies can buy their way into the United States and Europe. But American and European companies can’t do the same, a point that is generating friction among the largest economic blocs in the world.

The 2013 acquisition of Smithfield Foods by a Chinese competitor and this year’s announcement ChemChina would buy Syngenta, a Swiss developer of agricultural chemicals and seeds, have driven home a new reality in the global economy: China is now a foreign investor in a way it has never been.

As China’s economy slows, its major companies are seeking better returns elsewhere in the world, prodded by a government that envisions a corporate sector that bestrides the world like a colossus. But other countries see instead the emergence of giants who enjoy a protected market in China while they face Chinese competition.

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“Something has to change,” James Zimmerman, chairman of the American Chamber of Commerce in China, told a group of journalists visiting Beijing under the auspices of the East-West Center, a Honolulu think tank. “It’s more than abstract.”

Zimmerman, a longtime lawyer in China who runs the office of Sheppard Mullin Richter & Hampton LLP in the Chinese capital, said the group raised the issue with members of the U.S. Congress during a recent visit to Washington. That alone is a sea change for American companies, which long have resisted open criticism that draws the ire of Beijing.

What long has been moot, since Chinese companies weren’t making serious investments in the United States, is now an urgent matter, he said.

At an annual meeting known as the Strategic and Economic Dialogue, which begins this weekend, American officials will take up the matter of China’s relatively closed market for U.S. investment in areas like agriculture and financial services. U.S. business groups would like to see tougher reviews by the U.S. government on proposed Chinese investment in the United States as it reaches ever-higher levels, a position that many members of Congress support. But the administration of President Barack Obama is resisting that step, hoping a proposed bilateral investment pact could level the playing field for American companies without any new restrictions on the flow of money into the United States.

Privately, U.S. business groups are deliberating proposals that would allow the U.S. government to block more Chinese purchases of American companies unless China opens up more to foreign investment. Their plans include reinvigorating a mostly dormant part of a law administered by the U.S. Trade Representative that would allow retaliation against China, people briefed on the matter said.

Outflows of corporate capital from China — private companies and state-owned ones — has exploded in recent years, and hit $676 billion in 2015, according to the Institute for International Finance. The stock of Chinese foreign direct investment, the cumulative value of what’s flowed outward, tripled from 2010 to 2014 to about $900 billion.

Much of that money flowed into areas, like agriculture and financial services, that are all but off limits to foreign investors in China, whose money helped finance China’s rise as an export powerhouse. “It’s suddenly become a very important political issue,” said David Dollar, a senior fellow at the John L. Thornton China Center at the Brookings Institution in Washington. “And this cross-investment issue is the biggest one in the U.S.-China relationship.”

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China’s Shuanghui Group, which is based in the city of Luohe, about 800 miles northwest of Shanghai, bought Smithfield Foods based on an unusual rationale. Virginia-based Smithfield, like the entire U.S. pork production industry, has sought access to the Chinese market, but foreign investment in agriculture is severely restricted. So the solution was to be acquired by a Chinese firm, which faced no such restrictions.

Butchering hogs was one matter, but this year’s transaction — also in agriculture — has proved much more controversial.

In February, ChemChina, a state-owned company, offered $43 billion for Zurich-based Syngenta, a maker of pesticides and producer of seeds. The company, itself a fusion of a clutch of older Chinese firms still in government hands, had already started the process of taking control of Pirelli, an Italian tire maker, in 2015.

The United States has plenty of companies that compete with Syngenta, and would eagerly plunge into the Chinese market if they had the chance. But China’s regulators demonstrate “inconsistency” and “lack of synchronization” in their approval of imports of new bio-engineered crops in China, which is a major purchaser of all sorts of commodities, U.S. Secretary of Agriculture Thomas Vilsack complained in February.

“I have a watchful eye on all of this and continue to be extremely concerned about the way in which biotechnology and innovation is being treated and impeded by a system in China that often times is not based on science and appears to be based more on politics,” Vilsack said.

Likewise, the financial services industry has long chafed at the restrictions it faces in China, where all but a tiny fraction of businesses like securities underwriting, asset management and insurance are walled off from foreign competition.

And again, Chinese companies have demonstrated how open other economies are by going after acquisitions abroad. Anbang, a relatively obscure Chinese company, this year sought to buy insurer Fidelity & Guaranty Life of Des Moines, Iowa. The application has since been withdrawn though the company hopes to revisit the transaction.

Dollar, the Brookings Institution scholar and former official at the U.S. Treasury Department, has suggested using the Committee on Foreign Investment in the United States, known as CFIUS, as a stick to prod China to open up to U.S. and other firms.

CFIUS is charged with reviewing foreign investments that might affect U.S. national security, such as a bid by a Chinese firm to buy a sensitive piece of technology that has military applications. Dollar’s proposal would expand the committee’s remit to include reviews of investments by state-owned companies that haven’t signed a bilateral agreement with the United States.

Nathan Sheets, the undersecretary of the Treasury for international affairs, rejected the idea in a recent panel discussion with Dollar. Sheets argued new rules allowing restrictions on foreign investment would send the wrong signal to potential investors in the United States.

“I think CFIUS is rightly focused narrowly on the issue of national security and [whether] a transaction [would] have an implication for U.S. national security,” Sheets said. “And I think that’s where it should stay,” he added. “I think that if we were to broaden that mandate, that would create ambiguities about our openness to investment.”

Better, Sheets said, would be to conclude a credible bilateral investment treaty with China, a pact that’s designed to break down barriers.

The United States and China have been negotiating one for years, though. It has so far foundered on China’s unwillingness to prise open its market in key sectors.

But Sheets, and Obama, won’t be in office much longer, a fact that’s creating a fluid moment for reconsidering U.S. policy toward China.

Already, the mood in the U.S. Congress has darkened for Chinese investors, with some members even seeking new legislation that would force onto the Treasury and the White House the kind of powers that Sheets has rejected. Rep. Rose DeLauro, D-Conn., has proposed the government review whether a Chinese investment results in a “net economic benefit” to the United States.

Some business groups are considering privately another path: tweaks to a U.S. law, known as Section 301, which would give the U.S. Trade Representative the authority to block a Chinese transaction. That would let the U.S. government create incentives — carrots and sticks, by another name — for China to move ahead on a bilateral investment agreement: negotiate in good faith, or see your investments in the United States run afoul of U.S. law.

“By their standards, the business community has turned incredibly negative on China,” said Derek Scissors, a China scholar at the American Enterprise Institute. “They are looking for leverage. It may not be good for the United States but if we threaten to do something, maybe it will force the Chinese to open up.”