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

Univ. California SCCIE Working Paper No. 05-10; Univ. California Santa Cruz Economics Working Paper No. 599

20 Pages Posted: 15 May 2005

See all articles by K. C. Fung

K. C. Fung

University of California at Santa Cruz

Date Written: April 30, 2005

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., Trade and Investment Among China, the United States, and the Asia-Pacific Economies: An Invited Testimony to the U.S. Congressional Commission (April 30, 2005). Univ. California SCCIE Working Paper No. 05-10; Univ. California Santa Cruz Economics Working Paper No. 599, Available at SSRN: https://ssrn.com/abstract=721593 or http://dx.doi.org/10.2139/ssrn.721593

K.C. Fung (Contact Author)

University of California at Santa Cruz ( email )

Santa Cruz, CA 95064
United States
831-459-3273 (Phone)
831-459-5900 (Fax)

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