Chinese Investment in the United States; Recent Trends and the Policy Agenda

A new RHG report commissioned by the US-China Economic and Security Review Commission (USCC) describes the latest patterns of Chinese foreign direct investment in the United States, analyzes the regulatory framework for these investments, and discusses the implications for lawmakers with regard to national security and economic welfare.

Executive Summary

The rapid growth of outbound foreign direct investment (FDI) by firms from China is changing the patterns of global capital flows. Chinese FDI flows grew at an average annual rate of 27% over the past decade, from $3 billion in 2005 to $123 billion in 2015. Initially focused on extractive sectors in developing countries, today Chinese FDI flows increasingly to advanced economies where technology, brands, and sophisticated manufacturing assets are abundant. Chinese FDI activity in the US has grown rapidly in recent years, adding a major new dimension to US-China economic relations and drawing attention from policymakers on both sides. While U.S. leadership awareness and the quality of public debate over Chinese investment have improved, a combination of data gaps and the sheer growth in flows continues to make clear analysis challenging. It is therefore in the interest of the United States to better understand the nature of these inflows and how to interpret them, in order to secure the benefits while continuing to manage any traditional or new forms of potential associated risk.

This study seeks to reduce gaps in information availability and thereby contribute to sound policymaking. it provides an overview of existing datasets on Chinese direct investment in the United Staes and describes their utility, assesses recent patterns and policy-relevant metrics based on a supplemental proprietary dataset, and looks at the broader policy context. To compile this report the authors reviewed concepts and official datasets on foreign direct investment, utilized a dataset that captures Chinese FDI transactions in the US since 2000, and conducted numerous interviews with government officials, corporate executives, and researchers in the United States and China.

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