In this report, we explore the advent of Chinese investment in U.S. high-tech sectors in order to provide an objective starting point for debate about this nascent trend. We use a unique dataset on Chinese FDI transactions in the United States to describe the patterns of Chinese FDI in U.S. high-tech sectors, elaborate on the firm-level drivers of those investments, and present an initial assessment of the impacts from a U.S. perspective. We then identify the most important impediments to two-way U.S.–China high-tech investment flows and present recommendations for policy makers and businesses on both sides to address these stumbling blocks. We believe that growing Chinese outbound high-tech investment is an important determinant of the path forward for U.S.–China relations in general. Successful Chinese investments will make Americans recognize the potential benefits of greater economic integration with China through two-way investment flows and remind Chinese leaders that openness and convergence with a market-based innovation approach is in China’s own interest. A negative U.S. response to growing Chinese investment will aggravate existing tensions and give encouragement to proponents of a more nationalistic and discriminatory approach to technology, triggering a backlash against foreign firms in China and risking a protectionist downward spiral.
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