Saturday, 27 October 2007

US Foreign Direct Investment in China

Thanks to Chinagame (a new blog added to our blog roll here at ChinaEconomicsBlog) is an article on US FDI into China. Academics and students should have free access.

This is fairly basic business school stuff. The question is who actually believes the "fallacies" from the title? Anyone who knows about FDI flows into China should be aware that the US is only one player in many. Hong Kong, Taiwan are two of the biggest investors (Hong Kong still being seen as foreign - in my work I tend to broadly split FDI between OCED and "others" as well as more detailed breakdowns).

Information on some of the other "myths" that are bust will benefit the casual observer but more importantly it touches on the "off-shoring" issue that is politically so sensitive. It is often the case that multinationals that invest in China do not do so at the expense of domestic employment. The argument is that in the US the firm simply hires more "white collar" workers such as lawyers, accountants and most importantly, designers and R&D researchers, using the money saved on labour costs elsewhere.

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Facts and Fallacies About U.S. Fdi in China

LEE BRANSTETTER
Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; National Bureau of Economic Research (NBER)

C. FRITZ FOLEY
Harvard Business School; National Bureau of Economic Research (NBER) October 2007

NBER Working Paper No. W13470

Abstract:
Despite the rapid expansion of U.S.-China trade ties, the increase in U.S. FDI in China, and the expanding amount of economic research exploring these developments, a number of misconceptions distort the popular understanding of U.S. multinationals in China. In this paper, we seek to correct four common misunderstandings by providing a statistical portrait of several aspects of U.S. affiliate activity in the country and placing this activity in its appropriate economic context.

Chinagame.com provide a summary of the article.

Busting Myths About Foreign Direct Investment (FDI) In China

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