Working Paper: NBER ID: w13470
Authors: Lee Branstetter; C. Fritz Foley
Abstract: Despite the rapid expansion of U.S.-China trade ties, the increase in U.S. FDI in China, and the expanding amount of economic research exploring these developments, a number of misconceptions distort the popular understanding of U.S. multinationals in China. In this paper, we seek to correct four common misunderstandings by providing a statistical portrait of several aspects of U.S. affiliate activity in the country and placing this activity in its appropriate economic context.
Keywords: U.S. FDI; China; multinational firms; foreign direct investment; economic analysis
JEL Codes: F14; F23; O19; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Factors such as corruption and economic development levels (O17) | U.S. FDI in China is relatively small compared to total FDI in China (F64) |
| Factors such as corruption and economic development levels (O17) | U.S. MNE activity in China is lower than predicted by gravity models (F12) |
| Minimal intrafirm trade between U.S. affiliates and their U.S. parents (F23) | U.S. affiliates in China are predominantly focused on the domestic market rather than exporting to the U.S. (F10) |
| Firms expanding in China (F23) | Increased U.S. activity in China does not significantly displace investment elsewhere (F29) |
| R&D conducted by U.S. firms in China (O32) | U.S. multinational investment in China does not aggressively exploit China's technological capabilities (F23) |