Advancing sustainable growth in the United States and China

Paulson Institute Launches Series of US-China Investment Papers


Chicago, ILThe Paulson Institute today issued the first in a series of “Paulson Papers on Investment,” which explore opportunities for cross-border investment between the United States and China. Paulson Papers on Investment are written by distinguished specialists from business and academia. They aim to develop sensible investment models that make economic sense and well reflect political realities in both countries.

The Paulson Institute, an independent center located at the University of Chicago, is dedicated to fostering economic growth, including in the United States and China. The Institute’s Program on Cross-Border Investment includes three sectoral programs: (1) agribusiness programs that aim to support America’s dynamic agriculture sector, which needs new sources of investment to sustain innovation and create jobs; (2) manufacturing programs, in partnership with McKinsey & Company, which aim to identify new opportunities for cross-border manufacturing partnerships and examine the changing relationship between innovation and production; and (3) a case study program, which develops in-depth historical case studies of past Chinese direct investments in the United States, examining investment structures and drawing lessons learned.

“We see a gap in investment analysis — it is often abstract or disconnected from economic and political realities,” said Henry M. Paulson, Jr., chairman of the Paulson Institute and former US Secretary of the Treasury and chairman and chief executive of Goldman Sachs. “As a nonprofit organization, the Paulson Institute has carved out a unique niche, highlighting commercially viable opportunities on a sector-by-sector basis.”

The inaugural Paulson Paper on Investment, titled Prospects for US-China Trade in Meat Products and Associated Investment Opportunities, is part of the agribusiness series. Written by Dermot J. Hayes, Pioneer Hi-Bred International Chair in Agribusiness at Iowa State University and one of America’s most distinguished experts on the economics of meat, the paper offers insights into why the proposed acquisition of Smithfield by Shuanghui International is a harbinger of investment opportunities that could benefit both US farmers and Chinese consumers.

“The Chinese government, the agriculture community and consumers are facing a quandary with increasing prices and an inability to produce enough high quality meat to meet increasing demand,” said Hayes. “Savvy investors are in position to capitalize on the Chinese government’s inevitable recognition of the need for policy changes in the agricultural sector.”

In his investment paper, Hayes lays out three investment models that could emerge in the U.S.-China meat processing arena: (1) long-term production contracts; (2) animal parts arbitrage; and (3) labor-intensive exports from China that would shift the pattern of in animal protein away from uncertain domestic supply toward greater reliance on the international market.

“Our goal with these papers is to take a realistic look at opportunities, constraints, and obstacles in an effort to develop sensible investment models,” said Evan Feigenbaum, Paulson Institute vice chairman.  “We have our eyes wide open and don’t think every investment makes sense or will reflect economic or political realities. These papers explore failures, as well as successes. Ultimately, Paulson Papers on Investment aim to provide investors with valuable tools to understand emerging trends.”