The Green Light: Blame Washington for Corporate America Investing in China

For 40 years, the U.S. government sent implicit and often explicit messages to American firms: Invest in China.

It has become fashionable to accuse U.S. companies that invest in China of selling out America.

Peter Navarro speaks for many when he writes, “Many American corporations have become complicit in China’s rise by prioritizing profits over patriotism.” A widely reviewed book, Apple in China, likewise excoriates Apple for making a profit while enabling China’s tech ecosystem.

There is no question that if U.S. and other OECD-nation companies had not invested in China, the country would be far behind its current economic and technological standing. However, not only is indulging in emotionally satisfying corporate blame misleading, it points us toward the wrong solutions.

For 40 years, the U.S. government sent implicit and often explicit messages to American firms: Invest in China. The foreign policy establishment wanted U.S. companies in China, believing that keeping the Chinese Communist Party satisfied and making the country prosperous would advance U.S. interests by fostering global stability.

So, what did many American companies do? They did exactly what multiple White House administrations, both Republican and Democratic, wanted them to do.

From Carter to Obama

The excellent new book Breaking the Engagement: How China Won and Lost America by China scholar David Shambaugh provides a comprehensive history of these “green-light” promotional efforts. Below is a brief overview of how Washington encouraged corporate America to invest in China.

Carter Administration

In 1978, national security advisor Zbigniew Brzezinski said, “a strong and secure China is in America’s national interests” because Washington sought to exploit the Sino-Soviet split.

Reagan Administration

President Reagan proclaimed, “We believe that a more secure, modernizing, and friendly China… can make a significant contribution to peace and stability,” during the 12th G7 Summit in 1986. He even referred to the CCP as “so-called communists.”

H. W. Bush Administration

Under George H. W. Bush in 1989, National Security Council head Brent Scowcroft told Chinese leader Deng Xiaoping, “You and China could have no better friend than George Bush.”

Clinton Administration

During a 1997 radio address to the American public, President Clinton argued that the best way to promote U.S. interests was to “draw China in, to help it to become a strong and stable partner in shaping security and prosperity for the future.” And in 1999, he said, “Trade remains a force for social change in China, spreading the tools, contacts, and ideas to promote freedom… A policy of disengagement and confrontation would only strengthen those in China who oppose greater openness and freedom.” Throughout his presidency, Clinton echoed the conventional wisdom—still common today—that “you can’t expect people to be innovative economically while being stifled politically.”

Granting permanent normal trade relations (PNTR) status to China in 2000 could not have sent a clearer message to corporate America: You have the green light to invest in the country. Indeed, President Clinton said, “As all of you know, the United States signed the agreement to bring China into the WTO on terms that will open its market to American products and investments.”

W. Bush Administration

The second Bush administration was no different. In a Foreign Affairs article, national security advisor Condoleezza Rice wrote that “it is in America’s interest to strengthen the hands of those who seek economic integration.” President George W. Bush wanted to support China’s economic integration while containing its growing power and security ambitions. His Commerce Department reportedly sponsored and participated in conferences encouraging U.S. businesses to move operations to China, arguing this would make them more competitive against European and Japanese rivals.

Let me reiterate: The U.S. government wanted and actively encouraged American companies to open production facilities in China.

Obama Administration

President Obama continued the engagement approach. In 2009, before a meeting with Chinese President Hu Jintao, he stated, “I am committed to pursuing a genuinely cooperative and comprehensive relationship with China… given the growing number of common global and regional challenges our countries face.” In 2012, U.S. Ambassador to China Gary Locke lamented how little direct U.S. investment there had been in China before President Nixon’s 1972 meeting with CCP Chairman Mao Zedong. He highlighted the “enormous progress” in trade over the previous decades and noted that “people in both countries are benefiting from deepening economic integration.” During a joint press conference with President Xi Jinping in 2014, Obama said, “We agreed to work actively on a comprehensive bilateral investment treaty with high standards… opening up the opportunity for more U.S. businesses to invest here in China.”

The China Traffic Light

Washington’s signals to corporate America have progressed like a traffic light.

Green Light

For four decades, Washington gave American firms the green light to invest in China. There was not a single significant U.S. government policy or statement seeking to dissuade American companies from doing business in China, aside from restrictions on certain military-related technologies. Even then, Washington at times gave American defense contractors permission to sell weapons to China.

On top of that, the Office of the U.S. Trade Representative never brought a World Trade Organization case against China’s illegal practice of tying market access to technology transfer and domestic investment. Because Washington turned a blind eye, companies that wanted to sell in China had no choice but to invest there.

With the government’s consistent encouragement and with domestic and foreign competitors rushing to invest in China, what were companies supposed to think?

Yellow Light

The light didn’t turn yellow until Donald Trump’s election in 2016, when Washington began to shift away from its engagement strategy toward recognizing that the U.S.-China relationship should be and had always been characterized by “strategic competition.”

Red Light

Today, the light is red, with many casting U.S. companies in China as disloyal actors. But if we are going to accuse them of betrayal, shouldn’t we also blame American consumers? How many have been willing to pay a premium for “Made in America”? Almost none. Were they Benedict Arnolds or sellouts? Not according to the societal consensus.

If people want to criticize U.S. firms for continuing to invest in China in 2025, fair enough—it’s been clear for years the government would prefer they exit. But criticizing companies for investing before 2017 makes no sense. And in any case, U.S. firms’ investment in China is slowing, as many look to diversify production away from dependence on China, including Apple.

Dead End

What lies beyond the red light? Too often, it is just misplaced anger that distracts from real solutions. If we insist on assigning blame, it belongs with Washington, which spent 40 years signaling to corporate America that investing in China was in the national interest.

Ultimately, attacking large U.S. companies is a dead end. If we truly want to stop American firms from investing in China, it is incumbent on the U.S. government, ideally in collaboration with our allies, to establish the rules and incentives to make that happen.