One may be forgiven for assuming the worst about China's economic prospects, and particularly about trade prospects with the United States, given the alarmist commentary from politicians and the media in both countries. We suggest a rather different story, based on how those who have something substantial at stake are investing their time and money.

Cross-border foreign direct investment is one indicator of the real health of the international business environment. In the COVID year 2020, aggregate inbound U.S. FDI nearly halved, from $220 billion to $120 billion, total global FDI dropped a dramatic 35%. But FDI from Chinese enterprises into the United States rose by about 10%.

U.S. companies reduced their China-bound FDI by about 30% in the COVID year, to a decade-plus low. But China's inbound FDI from all countries increased by about 7%, making China the world's leading recipient of FDI, surpassing the United States. The global trend is one indicator that the U.S. figure for 2020 is an outlier, and therefore likely a temporary one.

Reviewing October's global trade data, which indicated a record high trade surplus for China, noted economist and longtime China resident Jonathan Anderson suggests that, "We talk about a deglobalizing world, but the reality is the globalization coefficient has actually increased after COVID, as you have had more outsourcing to the Chinese factory economy."

Qiantan International Business Zone in Shanghai, pictured on Nov. 19: China's inbound FDI from all countries increased by about 7%.   

© VCG/Getty Images

Institutional investors, who have a lot of skin in the game, and therefore enormous incentive to invest wisely, are not dissuaded by the punditocracy. Earlier this month, the Financial Times, not known for panda-hugging, titled an article, "Global investors turn cautiously optimistic on China." They cite Fidelity, Goldman Sachs, HSBC and Nomura as investment houses that have turned.

Gauging the sentiment of those with not just money but careers invested in the China-global business environment, the American Chamber of Commerce Shanghai and the European Union Chamber of Commerce in China have recently published their annual surveys of members, who are largely business leaders in multinationals here. Most of these business leaders are optimistic about the potential for their companies' China business presence. The AmCham respondents more so than in several previous years.

The EuroCham respondents indicate that their China margins held up during the COVID year and that these margins became much stronger than those in the other countries where the respondents' companies have a presence.

Conversely, the AmCham survey says that concern about U.S.-China relations is "the No. 1 reason why 80% of 107 members' global boards are rebalancing assets away from China." Even within the same companies, the degree of optimism seems to depend on one's location, with those overseas being substantially more pessimistic. China-based business leaders and institutional investors with skin in the game are substantially more optimistic about China's engagement with the Anglophone world.

This divergence, between the opinions of those deeply engaged with China vs. those in home offices or at editorial desks overseas, is nothing new. It has been true for so long that we do not recall a time when it was not. Carl Crow, a businessman with 25 years of China experience, published "400 Million Customers," an excellent book in large part about the divergence, in 1937.

Why should this be? The field of behavioral economics had produced enormous societal benefit and a number of Nobel Prize winners for illuminating the role of apophenia, the availability heuristic and confirmation bias in human decision-making. We see patterns where none exist, we evaluate what is readily available in front of us -- the bright shiny information objects in our daily lives - as more important than less visible or less recent phenomena, and we credit information that confirms what we have already concluded.

Those who can avoid these perceptual biases put themselves on the advantageous side of information asymmetry. And those with actual money to invest, or with time and careers invested on the ground in China, are intuitively more likely to have better information sources, and better noise filters, than those who rely primarily on a self-referential environment of offshore pundits and such.

Lujiazui financial district in Pudong, Shanghai, pictured on Mar. 5: China-based business leaders and institutional investors are more optimistic about China's engagement with the Anglophone world.   © Reuters

Finally, those on the advantageous side of this information asymmetry tend to make not only better judgments but more profitable ones, capturing the profit potential of the information arbitrage. Skill at assembling good information, and dismissing the bad, is one of the best predictors of the success of any investment decision.

But such valuable information comes with a cost, whether in money or in time or both. No free lunch. Tuition exists for a reason. Free information may be worth no more than what you pay for it. A phrase that deserves more attention in the social media age: "If you're not paying for the product, you are the product."

At the corporate or industry level, it takes a prodigious amount of research to uncover the China-specific incremental investment decisions of even every single large-cap multinational company, let alone those of legion smaller companies. Nonetheless, we may get a sense of the direction of those decisions from trade data and FDI flows, and from the Chamber surveys and similar.

To place oneself on the advantageous side of information asymmetry, the first step is to identify what one does not know and what will not help: free information that contradicts what those with an information advantage are not only saying, but doing with what matters: large amounts of their own money and time.

Incline toward those who have real skin in the game. By doing so, you gain an information arbitrage opportunity, and not just in China.

Nan Li is associate professor of finance at the Antai College of Economics & Management at Shanghai Jiao Tong University. John D. Van Fleet supports industry relations for the Antai College.

原文链接：

https://asia.nikkei.com/Opinion/Follow-the-money-not-the-rhetoric-to-make-sense-of-China-U.S.-ties