The Case for a US-China Bilateral Investment Treaty

Key Takeaways

• Over 2,200 BITs worldwide; US has 40, China 110
• 2016 negotiations reached 90% completion before being halted
• BIT could lower investment barriers, boost jobs and consumption in both economies
• Congressional‑executive agreement route could bypass Senate supermajority requirement
• BIT would address forced tech transfer, allowing wholly‑owned foreign subsidiaries

Pulse Analysis

The prospect of a U.S.–China Bilateral Investment Treaty (BIT) resurfaces as the two leaders prepare for a high‑stakes summit in Beijing. While trade talks have stalled, investment pacts have a longer track record: more than 2,200 BITs are active today, providing a legal scaffolding that reduces risk for multinational firms. For the United States, a BIT would extend the leverage built since the Reagan era, embedding safeguards for intellectual‑property, foreign‑exchange, and procurement that have traditionally been negotiated on a case‑by‑case basis. For China, it would offer a structured path to address U.S. concerns over subsidies and dual‑use technologies, while preserving its negative‑list approach to sensitive sectors such as defense and rare earths.

Beyond the diplomatic symbolism, a BIT could resolve the chronic issue of forced technology transfer that has plagued foreign investors in China. By allowing wholly‑owned subsidiaries, the treaty would eliminate the need for joint‑venture structures that often result in asymmetric knowledge flows. This change would be especially consequential in high‑tech arenas like advanced semiconductors and artificial intelligence, where both nations are locked in a strategic race. A well‑crafted BIT could also embed dynamic review mechanisms, enabling gradual liberalization of each side’s exclusion lists as trust builds.

Politically, the biggest obstacle is the U.S. Senate’s two‑thirds treaty ratification rule. The article proposes framing the BIT as a congressional‑executive agreement, a route that only requires a simple majority in both chambers, mirroring the process used for NAFTA and USMCA. If successful, the BIT would not only signal a new chapter in U.S.–China economic relations but also provide a template for future high‑stakes investment accords amid an increasingly fragmented global trade environment.