US more opposed to foreign investment in domestic companies than China

A survey exploring US and Chinese attitudes toward foreign companies investing in domestic business found Chinese participants were more receptive to the flow of overseas dollars.

Jointly conducted by professors from the University of Chicago, Princeton and Harvard, the survey gathered opinions from 2,010 US and 1,659 Chinese citizens regarding Mergers & Acquisitions (M&A) by foreign companies.

“These are the two countries where it is arguably most important to understand opposition to foreign investment,” the study, Public Opposition to Foreign Acquisitions of Domestic Companies Evidence from the United States and China, said.

Using general questions and hypothetical scenarios, they found Chinese respondents were less likely to view foreign investment as threatening national security or decreasing domestic employment, while Americans opposed foreign companies buying domestic companies.

“This fact is interesting because the United States currently has fewer restrictions on
foreign investments than China does,” it said.

Using a scale of 0 to 1, where 0 is negative and 1 is positive, US respondents registered a .67 positive average when asked if they thought foreign investment hurt national security.  China respondents registered a .58 positive average, meaning both countries viewed overseas investment as potentially threatening.

Both countries were more open to overseas investors if the current environment was reciprocal – meaning both countries are actively engaged in obtaining companies overseas.

The two countries vastly differed on whether they believe foreign investment creates jobs. Chinese participants strongly believed it creates jobs, while Americans overwhelmingly responded it decreases jobs.

According to 2015 statistics, the US only sends 1 percent of its annual FDI to China, where regulations on overseas investment are strict. China sends 3 percent to the US.

“Interestingly, although market access restrictions substantially increased opposition, support only increased by 2% when the foreign firms’ home country had signed a treaty providing American companies the ability to acquire their companies,” the study said.

Type of company – state-owned or private- and country of origin had little impact on American attitudes, with a 2 percent increase in opposition if the foreign company was government-owned. More important was the sector of the company, with opposition increasing by 18 percent if the foreign company was involved in an industry with potential national security risks.

“Our research suggests that current investment negotiations between the United States and China may have potential to increase FDI flows between these two countries,” the study said.

“If a Bilateral Investment Treaty were to lower reciprocal barriers to foreign investment, this in turn may reduce opposition to specific foreign investments”

“In short, reducing barriers to foreign investment may help to increase support for foreign acquisitions of domestic firms.”

The study was published on July 31st, 2015, by Harvard.

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