The rise of Chinese foreign direct investment in the United States: Disentangling investment strategies of state-owned and private enterprises

Lisha HE, Ronghao JIANG, Mia M. BENNETT*

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

Abstract

Over the last two decades, China's outward foreign direct investment (OFDI) has expanded rapidly. The country is now the world's second-largest source of OFDI. China is often viewed as a monolithic investor, however, without sufficient attention to the differences between investments by state-owned enterprises (SOEs) and private enterprises (PEs). To shed light on the internal complexity and heterogeneity of Chinese OFDI, we construct a panel dataset of investments in the U.S. across the 50 states and Washington, D.C. from 2005 to 2017, which we analyze using a spatial autoregressive model. We find clear evidence that the ownership structure of Chinese firms affects investment strategy and entry mode. Statistical analysis indicates that SOEs are more likely to pursue greenfield investment motivated by market-seeking and resource-seeking objectives, while PEs pursue mergers and acquisitions in order to obtain strategic assets. We also detect a positive and significant relationship between the presence of Chinese overseas communities and OFDI, with the strength of the correlation depending on ownership structure. Finally, we find that Chinese OFDI is spatially dependent, meaning that investments flow to states where they are already concentrated nearby.

Original languageEnglish
Pages (from-to)1562-1587
Number of pages26
JournalGrowth and Change
Volume51
Issue number4
DOIs
Publication statusPublished - Dec 2020
Externally publishedYes

Bibliographical note

Funding Information:
The University of Hong Kong Seed Fund for Basic Research provided financial support for this study.

Publisher Copyright:
© 2020 Wiley Periodicals LLC.

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