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| US Outward FDI:Is China a Special Host Country? |
| LUO Changyuan, MAO Chengxue, CHAI Qingyuan
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| Institute of World Economy, Fudan University; Department of Economics, Fudan University |
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Abstract This paper investigates whether China is a special host country of US FDI. We rely on the data of US direct investment in 156 countries and carry out empirical studies. The estimation results show that, as a whole, US FDI in China did not deviate from the should-be value. In the manufacturing sector, there is evidence indicating that US investment in China was above the should-be value. With comparison to other countries, in China, market size, level of economic development, economic growth and trade openness promote more US FDI in the manufacturing sector. However, institutional distance prevents US FDI entering the manufacturing sector more strongly in China than in other countries. Compared to the manufacturing sector, the service sector in China should do a little more to improve US FDI. Based on these research findings, we believe that there are two reasons why US FDI in China seemed lower than the should-be value. On the one hand, the promoting factors like market size, level of economic development, economic growth and trade openness are always emphasized. However, the preventing factors like geographical distance, institutional distance and cultural distance are usually neglected. On the other hand, the potential of the service sector in attracting US FDI has not been fully realized, which leads to a negative impact on the total US FDI.
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Received: 27 September 2017
Published: 22 January 2019
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