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Investing in the United States

Is the US Ready for FDI from China?

Edited by Karl P. Sauvant

This essential book analyzes the regulatory and operational challenges that foreign direct investors face in the United States, as well as the ways in which these challenges can be overcome.
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Chapter 1: Is the United States Ready for FDI from China? Overview

Karl P. Sauvant


* Karl P. Sauvant INTRODUCTION Important new players are entering the world market for foreign direct investment (FDI): firms from emerging markets.1 While there have always been multinational enterprises (MNEs) based in these economies, it is only recently that their outward FDI has become significant. Thus, in 2007 alone, emerging-market MNEs invested some $300 billion abroad,2 more than ten times total world FDI outflows 25 earlier. This investment is being undertaken by more than 20,000 emerging market multinationals, in all economic sectors, in all parts of the world. Among emerging-market MNEs, none have received more attention than those headquartered in China. Within the span of fewer than ten years (2000–2007), they invested an estimated $68 billion abroad, for a total stock of $96 billion at the end of 2007 (Figures 1.1 and 1.2), catapulting China into the ranks of the leading outward investors among emerging markets. This investment takes place in all sectors (and especially services – Table 1.1) and regions of the world (Table 1.2), “through more than 5000 Chinese investment entities hav[ing] established nearly 10,000 overseas enterprises through direct investment across 172 countries and/or economies.”3 While there are many firms that undertake outward foreign direct investment (OFDI), the great majority of the largest Chinese MNEs consists of state-owned enterprises administered by the central government. They accounted for 83 percent of OFDI flows in 2005; by the end of 2005, their share of OFDI stock was 84 percent.4 Eighteen among the largest had, in 2006,...

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