Chinese Direct Investment in the United States

The United States and China are at a turning point in their economic
relationship. In the past, foreign direct investment (FDI) flowed predominantly from
the “developed world” to the “developing world,” from countries such as the United
States to those like China. Now, Chinese firms are increasingly investing in
developed economies, driven by structural adjustment at home. In this article we
describe this inflection point for Chinese FDI in the United States and examine the
patterns of Chinese investment in America to date. We then discuss the potential
impacts of greater levels of Chinese FDI and how the special characteristics of China’s
political and economic system challenge the traditional stance of openness to FDI in
the United States and other developed economies. Finally, we summarize the
political reaction in the United States to date, with a particular focus on emerging
“next generation” policy issues.