The fortunes of the US and Chinese economies are inextricably linked, now more than ever. Over the last decade, bilateral trade has increased five-fold to more than $500 billion. The United States is China’s largest trading partner and China has surpassed Mexico to become America’s second-largest partner. The total value of US investment in China was $54 billion at the end of 2011 while Chinese investment in the United States is estimated to have increased six-fold to more than $23 billion over the last five years. The large and growing volume of trade and investment between the two countries demonstrates the interdependence and complementarity of their respective economies.

It is incumbent on both governments to forge a 21st century economic agenda— one that allows the two countries to identify policies and conclude agreements that re-anchor the US-China economic relationship and shows how strengthening that relationship can benefit the global economy. A bilateral investment treaty (BIT) will be one important component of this 21st century relationship. It is also a logical place to start.

This policy memorandum explains why—and offers guidance and counsel to both sides about how to move toward an agreement.

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