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Busting Myths About Foreign Direct Investment (FDI) In China
By Paul Midler | October 14, 2007
The National Bureau of Economic Research has published a working paper on FDI in China. The authors have busted four myths on FDI in China. Article is available for a small fee here, quick points related to the article:
Myth 1: American FDI in China is huge
American FDI in China is small as a proportion of total investment into China. And of investments American firms make abroad, China catches a smaller percentage than thought. Inflows from American firms to China is modest on the whole.
Myth 2: American FDI in China is Export-Oriented
An interesting myth buster since the Chinese government made a point during the product recall crisis that many of its exports were produced by foreign-invested firms. Many of those companies considered “foreign” include Hong Kong and China. American and European assets in play contributed almost nothing to the export boom.
Myth 3: Investments made in China displaced investments in other economies
Data from multinationals suggests that increases in foreign investment in China are correlated with increases in employment elsewhere in the world. American multinationals that expand into China are “almost as likely to expand employment domestically as they are to cut it.”
Myth 4: American companies are making the most of Chinese tech
Multinationals inside China have extremely low levels of R&D in China. There is also evidence in the track record for patents filed with the US Patent and Trademark Office (USPTO) by Chinese firms. As an exporter of technologically advanced products, China has some ways to go.
Topics: Uncategorized |
October 24th, 2007 at 8:52 pm
I wonder how accurate this is. I bet lots of the money pouring in through Hong Kong, the Cayman Islands etc. is actually American money. Also, if Walmart signs a contract to buy $1 billion worth of shoes leading to a factory in Dongguan doubling production capacity, how is that calculated? It seems that a lot of companies don’t really want to own their own manufacturing plants anymore, better to have a Chinese or Taiwanese middleman singing karaoke with local officials and squeezing the workers on their behalf.
October 25th, 2007 at 10:39 am
I’m not sure what to make out of the report, to be frank. Taiwan investment is typically considered “FDI”. Large orders placed by foreign companies is almost never considered foreign investment. The article is worth a read since it is written by business school professors, and they have done the related research.
The main thing that interested me was that the Chinese government tried to link product recalls with FDI, and it’s simply not the case.