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Trade and Investment among China, the United States, and the Asia-Pacific Economies: An Invited Testimony to the U.S. Congressional Commission

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  • Fung, K. C.

Abstract

In this paper I discuss six special features of China's trade and direct investment. These characteristics include an extensive role played by foreign-invested firms, a large percentage of re-exports and processed exports, a geographical concentration of trade and investment, a growing importance of high-technology trade and wholly foreign-owned enterprises being the dominant mode of investment. As a developing economy, China is unusual in playing two important roles for the United States and for Asia-Pacific economies in general. It is a competitive, low-cost export platform. At the same time, it is a large and growing market. Japanese and U.S. affiliates located in China typically sell about half or more of their products produced in China in the domestic Chinese market. U.S. government data show that U.S. affiliates in China are becoming more and more profitable. China has also become an important link in the global supply chain. There is a thick and growing production network among China and other East and Southeast Asian economies. Because of such a network, foreign direct investment flows to China tend to be positively related to foreign direct investment flows to other Asian economies.

Suggested Citation

  • Fung, K. C., 2005. "Trade and Investment among China, the United States, and the Asia-Pacific Economies: An Invited Testimony to the U.S. Congressional Commission," Santa Cruz Department of Economics, Working Paper Series qt15x564x2, Department of Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:ucscec:qt15x564x2
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    References listed on IDEAS

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    1. Fung, K.C. & Iizaka, Hitomi & Siu, Alan, 2004. "Integrating the two Asian economic giants: Japanese multinational corporations in China," Journal of Asian Economics, Elsevier, vol. 15(5), pages 957-975, October.
    2. Barry Naughton, 1996. "China's Emergence and Prospects as a Trading Nation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 273-344.
    3. Robert C. Feenstra, 1999. "Discrepancies in International Data: An Application to China-Hong Kong Entrepot Trade," American Economic Review, American Economic Association, vol. 89(2), pages 338-343, May.
    4. Robert C. Feenstra & Gordon H. Hanson, 2004. "Intermediaries in Entrepôt Trade: Hong Kong Re‐Exports of Chinese Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 3-35, March.
    5. Busakorn Chantasasawat & K. C. Fung & Hitomi Iizaka & Alan Siu, 2004. "The Giant Sucking Sound: Is China Diverting Foreign Direct Investment from Other Asian Economies?," Asian Economic Papers, MIT Press, vol. 3(3), pages 122-140.
    6. K. C. Fung, 1998. "Accounting for Chinese Trade: Some National and Regional Considerations," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 173-204, National Bureau of Economic Research, Inc.
    7. Fung, K. C. & Iizaka, Hitomi & Siu, Alan, 2003. "Japanese direct investment in China," China Economic Review, Elsevier, vol. 14(3), pages 304-315.
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    Cited by:

    1. Naubahar Sharif & Can Huang, 2009. "Cross-border Investment and Economic Integration: The Case of Guangdong Province and Hong Kong SAR," Chapters, in: Wilfred Dolfsma & Geert Duysters & Ionara Costa (ed.), Multinationals and Emerging Economies, chapter 6, Edward Elgar Publishing.
    2. Qu, Zhe & Huang, Can & Zhang, Mingqian & Zhao, Yanyun, 2013. "R&D offshoring, technology learning and R&D efforts of host country firms in emerging economies," Research Policy, Elsevier, vol. 42(2), pages 502-516.
    3. Lurong Chen & Philippe De Lombaerde, 2013. "China moving up the value chain: What can be learned from the Asian NICs?," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 16(4), pages 407-430, December.
    4. Huang, Can & Qu, Zhe & Zhang, Mingqian & Zhao, Yanyun, 2007. "R&D offshoring and technology learning in emerging economies: Firm-level evidence from the ICT industry," MERIT Working Papers 2007-023, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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