An Analysis of the Obstacles Faced by Chinese FDI in the U.S.

Studenteropgave: Kandidatspeciale og HD afgangsprojekt

  • Yang Xu
4. semester, Udviklingsstudier, Kandidat (Kandidatuddannelse)
China is a new player in American direct investment market but the value of Chinese FDI to the U.S. has been skyrocketing since the breakout of financial crisis. Committee on Foreign Investment in the U.S. (CFIUS) is the screening organ against national security concerns. CFIUS is sensitive to investment with governmental background. China-related transactions are easier to enter CFIUS’ vision because the relations between the Chinese government/Communist Party of China and Chinese firms are far from clear. Since 2005, there has been a wide-spread discussion in the U.S. about Chinese FDI and it is still without consensus today. Americans lost confidence during financial crisis and has deepened their distrust of China. American concerns derived from national security issues, economic security issues and reciprocity issues. Although the U.S. mainstream attitudes and policies remain open to Chinese investment, several troubled cases have created an impression among the Chinese that Chinese FDI is not welcomed by the U.S..
Recent years witness investment obstacles faced by Chinese firms in the U.S., and the reasons are four-folds. First, China is viewed by Americans as a strategic rival. Unlike other American major economic partners that are Western allies, China is perceived as the only country that has the potential to challenge the U.S. global hegemony. Taking a realist approach, the U.S. focuses on the relative gains when dealing economic relations with China. It fears that economic interactions with China are helping China strengthen its national power. Second, Americans are averse and scared to “Chinese State Capitalism”. They are concerned that China Model, which is different from Western market-based model, might threaten to undermine the U.S. economic competitiveness by distorting its market order and disadvantaging U.S. companies. Third, Americans’ distrust of China is increasing under complex circumstances. Some Americans, especially those from the security community, are likely to view Chinese investors with suspicion by taking a negative presumption of it. And fourth, Chinese FDI is subject to influences by bilateral economic relations and U.S. politics. From a top-down perspective, the Congress perceives Chinese FDI against the backdrop of broader U.S.-China economic relationship and even bilateral relations. From a bottom-up angle, Congressmen, under the motivation of being re-elected, speak for their constituencies. The constituencies where congressmen come from and their economic relations with China do matters.
The thesis holds that: (1) given the differences between China and the U.S. and the strategic and competitive nature of this bilateral relationship, the U.S. is hard to identify and trust Chinese FDI. Therefore, the obstacles and the unfavorable public environment for Chinese investors will sustain in the foreseeable future. (2) China is also responsible for this problem. On the one hand, China’s government-market relationship is in ambiguity, and the law enforcement in the country is weak. But Chinese do not acknowledge their problems. On the other hand, Chinese do not sufficiently understand U.S. politics and are unfamiliar with American rules of the game. They tend to see each action taken by the U.S. as a part of the U.S. strategy. And they do not have sufficient evaluation of the U.S. investment climate and landscape. (3) The problem of investment obstacles does not change the fact that the U.S. welcomes Chinese investors generally. There are both pros and cons about the Chinese FDI in the U.S., and the general atmosphere is actually not hostile.
SpecialiseringsretningChina and International Relations
ID: 197859306