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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 4: The Politics of Chinese Investment in the US

Timothy Frye and Pablo M. Pinto


Timothy Frye and Pablo M. Pinto* INTRODUCTION Why are economic policies that are widely believed to improve social welfare often not adopted? A consensus reigns among economists that restrictions on the free flow of foreign investment impair social welfare and that economies as a whole would grow larger where those restrictions are lifted. Yet, countries often raise barriers to the free flow of capital and goods, to their economic detriment. Chinese investment in the US illustrates this more general puzzle. For example, while Chinese companies have made several highprofile investments in the US in the last decade (for example, IBM), other efforts have failed (for example, Maytag, Unocal). Whether additional barriers will be placed on investment from China in the future is very much an open question.1 This chapter maps the landscape of stakeholders involved in policy decisions over Chinese foreign direct investment (FDI) in the United States, with the larger goal of identifying the political dynamics motivating support for and opposition to FDI from China. We analyze both the political demand and the supply of politics on this issue. On the demand side, we identify the power and preferences of major stakeholders in decision-making, including business lobbies, labor organizations and the mass public. Which groups are most active and successful in lobbying for and against easier access for Chinese investment? In addition, we explore how interest groups and foreign policy elites may shape public debate on investment from China. In seeking to justify their positions, do they refer primarily...

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