Thinking beyond China's cheap labor producing cheap export goods and giant trade imbalances, Chinese companies putting down roots in the US market could well produce great mutual benefits.

When Chinese Commerce Minister Bo Xilai addressed business and government leaders at a Chicago Council on Global Affairs luncheon in Chicago May 31, his emphasis on a China-US "joint effort to win" received an enthusiastic response.

He spoke at a time when some US politicians and labor unions blame China for taking away manufacturing jobs and say that the US$232.5 billion trade deficit with China is caused by the undervalued yuan.

At the same time, it is also widely recognized that US consumers have greatly benefited from low-cost Chinese imports to maintain their high standard of living.

And China's surge in "going out" is having some positive effects on that trade deficit. In May, a large Chinese procurement delegation toured 25 US cities and signed deals with US companies worth US$32.60 billion. This sum equals 14 percent of the 2006 trade imbalance between the two countries.

In today's division-of-labor global economy, however, the US will not be able to balance its payments with China on the trade front, especially with its tight restrictions on high-tech exports to China.

Instead, it is apparent that the US should look at other options that will improve its trade position.

Some insight into these options was provided in Washington last month during the second session of the Strategic Economic Dialogue between the United States and China.

US Treasury Secretary Henry Paulson's closing statement summarized: "The United States and China understand that getting our economic relationship right is vital not only to our people, but to the world economy. Our relationship works best when it produces mutual benefits, which lead to growth, balance and a stronger global economy."

The mutual benefits desired can come, in part, from China's vigorous efforts to transform its manufacture-based economy into one that is more diversified and capable of competing in the fast-changing global economy.

For example, to diversify the country's US$1.2 trillion foreign exchange reserve holding, China's State Investment Co signed an agreement to take a US$3 billion equity position in US private equity Blackstone Group.

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And, at the May 15 Chinese Enterprises Outbound Investment Conference in Beijing, Zhang Xiaoqiang, vice-minister of the National Development and Reform Commission, indicated that Chinese government entities will provide diplomatic, foreign exchange, tax, customs, credit, insurance and other support to Chinese overseas investment in targeted industries.

The US economy will benefit from Chinese investment. It will create jobs for Americans, increase purchases of goods and services from US businesses, raise tax revenues at different levels of the US government.

Chinese investment in the US will also benefit China. It will help in gaining market access and market intelligence, acquiring a skilled workforce and management talent, brand recognition and profits.

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