The Impact of Chinese Foreign Direct Investment on US Industry

Drawing on institutional perspectives and theoretical models such as the OLI paradigm, internalization theory, and the investment development path, the article highlights that foreign direct investment (FDI) is driven by a mix of resource-, market-, efficiency-, and asset-seeking motives, often overlapping in practice. While FDI can boost industrialization, productivity, technology and innovation, and integration into trade, its gains remain contingent and mostly rely on host country absorptive capacity, governance quality, and policy setting. Overall, FDI emerges as a potentially transformative force whose developmental impact is shaped by both firm-level strategies and broader structural conditions, offering a nuanced foundation for analyzing its empirical relationship with U.S. industry performance. The article outlines a multi-stage empirical framework used to examine the relationship between Chinese FDI inflows and U.S. industrial performance from 2000 to 2024. It begins with the selection of twelve key industrial indicators – spanning labor, investment, innovation, and environmental impact – based on global FDI literature and sourced from reputable institutions. To ensure data comparability, missing values were imputed using ETS forecasting, and all variables were standardized through z-score normalization. Stationarity was verified through the Augmented augmented Dickey-Fuller test and differencing where appropriate. Preliminary linear correlations were identified through Pearson correlation analysis, and ordinary least squares regression models were employed to quantify the direction and extent to which FDI had an impact on selected indicators. Finally, Granger causality tests were conducted to assess whether Chinese FDI can statistically predict changes in industrial performance, thereby introducing a temporal dimension. Together, these steps establish a rigorous and statistically valid basis for evaluating the economic relevance and potential causal role of Chinese FDI in shaping U.S. industry outcomes. The empirical research determines Chinese FDI inward flows to be positively and significantly related to five important American industrial variables: employment, investment in capital, capacity utilization, energy consumption, and CO₂ emissions. Pearson correlation coefficients are between r ≈ 0.5756 (for employment) and r ≈ 0.7538 (for CO₂ emissions), and all five demonstrate strong and moderate correlations along with p-values < 0.05. Regression analysis also yields these relations, though through statistically significant coefficients (e.g., β ≈ 1.0577 for CO₂ emissions, β ≈ 0.6736 for investment in capital), and R² values between ≈ 0.33 and ≈ 0.57, which indicate a strong explanatory power for FDI. And for respective metrics, Granger causality tests yield p-values well above 0.05 (e.g., p ≈ 0.6992 for employment, p ≈ 0.3845 for investment in capital) and therefore no statistical short-run causal relationship. Thus, while FDI is closely associated with improved industrial outcomes, its influence appears to be contemporaneous rather than predictive, shaped more by structural alignment than by temporal causality.