How U.S. Antidumping Actions Affect China’s Inward and Outward FDI

Shen Guobing
Institute of World Economy, School of Economics, Fudan University, Shanghai, China

 
Abstract: This paper presents an empirical study of how U.S. antidumping (AD) actions against China affect China’s inward and outward foreign direct investment (FDI) based on the international division of labor model. Our findings are as follows: (1) The U.S.-China trade deficit has been widened by both downstream firms in China established through vertical FDI and also inward enterprises established through horizontal FDI. The widening deficit in turn exacerbates vitriolic complaints in the U.S. about injury to its industries. This will lead to further U.S. AD actions discouraging FDI in China. (2) U.S. AD cases against China have negatively impacted China’s metal manufacturing, chemical, and, especially, textile industries in terms of exports and inward FDI. From 2004 to 2009, the share of total inward FDI going to China’s manufacturing sector has dropped drastically by almost 20 percent. This supports predictions made using the international division of labor model. (3) With U.S. AD actions against Chinese products on the rise, Chinese firms chose not to circumvent such barriers through outward FDI in the U.S. but rather through outward FDI in tax havens. Such a pattern of outward FDI is not helpful for China to establish its own successful industrial development model.
Key words: U.S. antidumping actions against China, vertical division of labor,horizontal division of labor, inward FDI, outward FDI

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