Benefits and challenges of chinese FDI in USA

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V. Samartsev, Vladivostok State University of Economics and Service, 41 Gogol Str., Vladivostok, 690014, Russian Federation (vvsam2@yandex.ru).



Abstract

     About ten years ago China’s forex reserves increased to the level when it became a problem to manage them. At first, Beijing declared “safety” to be its priority and preferred to allocate currency excess into stable, but low-dividend US Treasury bonds. Over a period of years, China, one of the richest creditors of the world, used to have a negative balance on investment payments. 
     Time changes and “to earn” is vital. Under the “going out strategy” Chinese government pushes national enterprises to expand abroad in search for new markets, technologies, and higher profits. The USA with its unique combination of strong economy, innovations, and talents – is one of the most attractive destinations. 
     This article is intended to shed some light on China’s current FDI position in the United States. Though several preconditions caused the adjustment of its outward investment policy, taking into account Beijing’s practical approach while facing any radical change the growth in M&A does not mean hasty denial of Treasuries. 
     Due to its late start of Chinese FDI into the American economy its volume is currently as low as of the Scandinavian countries. In the meantime, according to available statistics, Chinese FDI into US increased 6–8.5 times from 2008 to 2012. So far, if China keeps up the pace it may come to the fore at the end of the current decade. 
     Contrary to prevailing view that government structures dominate in “China Inc.” it is not true: socio-economic transition and tougher competition inside this country push all kinds of Chinese entrepreneurs to seek business opportunities abroad. Chinese FDI come to many US economy sectors, such as energy, agriculture, real estate, IT. Geographically FDI tend to get a foothold in the areas with vast Chinese diaspora, primarily in California, New York, and Texas. 
     American authorities now face the challenge of clearly determining their position in terms of risks and benefits of Chinese capital flows. Otherwise, many potential Chinese investors will prefer to go to the other regions of the world.


Keywords

China, USA, FDI, foreign assets, balance on investment payments, investment barriers, CFIUS, M&A, strategic and market risks, innovations


Registered in system SCIENCE INDEX

For citation:
Samartsev V. Benefits and challenges of chinese FDI in USA. Mirovaya ekonomika i mezhdunarodnye otnosheniya, 2014, No 10, pp. 57-72



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