Califonia direct foreign investment

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All rights reserved. To download an electronic version of this report, please visit www. Wadsworth, Co-Chairman N. Rosen is co-founder and China Practice Leader of Rhodium Group, a private research rm that advises both the public and private sectors. China Relations. His research focuses on Chinas macroeconomic development and the implications for global trade and investment ows. Hanemann works with the private and public sectors in assessing Chinas role in global cross-border investment transactions.

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A foreign direct investment FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. The origin of the investment does not impact the definition, as an FDI: the investment may be made either «inorganically» by buying a company in the target country or «organically» by expanding the operations of an existing business in that country. Broadly, foreign direct investment includes «mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans». In a narrow sense, foreign direct investment refers just to building new facility, and a lasting management interest 10 percent or more of voting stock in an enterprise operating in an economy other than that of the investor. FDI usually involves participation in management, joint-venture , transfer of technology and expertise. Stock of FDI is the net i. FDI, a subset of international factor movements , is characterized by controlling ownership of a business enterprise in one country by an entity based in another country.

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All rights reserved. To download an electronic version of this report, please visit www. Wadsworth, Co-Chairman N. Rosen is co-founder and China Practice Leader of Rhodium Group, a private research rm that advises direcr the public and private sectors.

China Relations. His research focuses on Chinas macroeconomic development and the implications for global trade and investment ows. Hanemann works with the private and public sectors in assessing Chinas role in global cross-border investment transactions. He is a frequent speaker and commentator on Chinas outward investment and has published numerous articles on the topic.

A major study with Mr. Rosen on the global policy implications of the rise in Chinas global investment is scheduled cxlifonia release in spring from the Peterson Institute for International Economics in Washington, D. Rhodium Group combines policy experience, quantitative economic tools, and on-the-ground research to analyze disruptive global trends.

Its work supports the investment management, strategic planning, and policy needs of the nancial, corporate, government, and not-for-prot sectors. Te China Investment Monitor is an interactive online tool developed by Rhodium Group that allows users to track Chinese direct investment transactions in the United States by state and industry.

Contents 6 Contents Foreword. Authors Acknowledgments. Executive Summary. The Benets of Chinese Investment. Patterns of Chinese Investment in California. Drivers and Targeted Industries. Investors and Entry Modes. The Potential for Future Growth. Conclusions: Working Together to Maximize Benets.

One of the most signicant of cirect changes is the way in which ows of foreign direct investment FDI now move around the world. During the last century, most ows of global investment capital moved back and forth between the so-called developed nations of the Western world. With the largest, most forelgn, and most dynamic economy, the United States has long been such an alluring destination for FDI that Americans hardly even needed to think about soliciting it. But toward the end of the last century, Western countries also began to step up investments in emerg- ing marketsthat is, in inveestment economies of countries once referred to, somewhat dismissively, as the third world or the developing world.

Now, however, cslifonia we head into the second decade of the twenty-rst century, the United States and the global economy nd themselves on the precipice of yet another great and unanticipated change in global capital ows: funds moving from the developing to the developed world. In other words, increasing amounts of FDI are beginning to ow abroad from nations such as China and India.

China has vastly ramped up its outward FDI in recent years, and init even made the top 10 list of global investors. But the source of those ows is increasingly coming from countries such as China. Indeed, our recent report, An American Open Door?

In other words, the river calfionia investment that once ran almost exclusively from West to East is now beginning to ow in the other direction as well, from East to West. Where will all of this new FDI end up? How will the changing FDI landscape aect American interests? What are the current obstructions preventing the United States from doing so, and how can those obstructions be overcome?

What new strategies should both the federal government and U. Te most notable conclusion that emerged from An American Open Door? Tree other realities seem inescapable: Te historic change in ows of FDI from China will aect America in a profound way. It is emphatically forejgn the Cwlifonia. It is dangerous to assume that because of the historic openness of the U. So, how does California t into this changing global picture?

As a follow-up to our last report, which looked generally at FDI ows from China to the United States, we thought that it would make sense to look at the califohia through the lens investmentt a specic geographic region. Because California is not only the largest and arguably most iconic state in the United States, but also a dynamic and varied economy with a historical relationship with China, we thought that it was an obvious and logical choice. Again we chose fordign work with Daniel H.

Rosen and Tilo Hanemann of Rhodium Califoonia to help us illuminate the actual state of past ows of direct investment into California and to suggest what future ows can be anticipated. Te report also recom- mends how the state might interface more eectively with Chinese state-owned and private investors to encourage further investment.

Toward that end, the Asia Society is pleased to oer this study. We do so in the hope that this eort will investmenf of some utility to the state of California as it goes about the process of encouraging more Chinese investment.

We are also pleased to be working with California Governor Jerry Brown and other state o cials in the califpnia that the states economy can be invigorated by increased FDI from China and that, if we are successful, something of a model for other states can be created as. For, as fraught as this bilateral relationship can be, because so many global problems cannot be remedied without joint SinoU.

As with last years An American Open Door? We would like to thank the principals at Asia Society for their support and encouragement, including Orville Schell at the Center on U.

Robert Bullock, Robert W. Hsu, Wendy Soone-Broder, Kate Ryge, Maria Scarzella-Torpe, and other Asia Society sta provided useful feedback and worked hard behind the scenes to minimize the administrative burden and maximize the impact of our research. Our particular thanks are due to Jack Wadsworth, who, in addition to his leadership as Vice-Chairman of the Asia Society and a key supporter of this research, shared his experience, contacts, and wisdom from 49 years and counting in nance and investment.

Claifonia participants in three study groups in San Francisco June 19,Sacramento June 20and Los Angeles June 21 provided useful reactions and comments on early drafts of the report. We owe a debt of gratitude to a number of fellow economists at the Peterson Institute for International Economics who have worked on the larger topic of foreign direct investment in the past.

Jacob Kirkegaard provided critical feedback on our work and greatly helped inform our understanding of global capital ows. Finally, special thanks go to our colleagues at Rhodium Group in New York City for their superb re- search support and critical comments.

Shashank Mohan helped optimize our search algorithms and quantitative analysis. Michelle McKeehan managed the editorial process with enthusiasm and responsibility. While all of these people improved the outcome, imperfections surely remain, which are solely the responsibility of the authors. Daniel H. Given the evolving set of motives for Chinese investors, the United States and other developed economies can expect to receive a substantial share of these ows. California, with its long history with China, the most sizable Chinese Dlrect population in the country, and more inward investment deals from China than any other state, is in a position to lead the nation in attracting Chinese investment in the decade to come.

Tose ows would bolster employment, feed the tax base, generate exports, and bring positive spillovers of know-how and relationships. However, these benets are not foreordained. Competitors for these dollars are ramping up eorts to attract Chinese rms, and they could well out-compete California if the state fails to resolve its scal and political problems, provide attractive terms to Chinese rms, and demonstrate its readiness to stand up for Chinese investors and address OFDI impediments at the national level.

To build the case for a robust response to these opportunities and looming risks, this report analyzes Chinese invest- ment in California in depth, mining a unique database for insights about Californias comparative advantages, the Chinese rms most suited to its economy, and the forces motivating this inection in cross-border investment patterns.

We explain where China is as an outbound investor relative to its past, its future, and other countries and assess Californias position as a destination for Chinese OFDI ows compared to its sister states.

Te report argues that maximizing Californias success as a host for Chinese investors must start with better coordination among interested stakeholders, including government, business, and civil society.

No single politician, government agency, or chamber of commerce can deliver success; attractiveness is truly a function of coordination across all of these actors, and many. Building on this call to action, the study suggests four initial steps in a long-term strategy to establish California as the top choice in America for Chinese OFDI dollars: 1. Understand Californias value and Chinas needs.

Amid tough competition for Chinese capital, a thorough understanding of Chinese motives and what California has to oer is the cornerstone of a strategy to promote Chinese investment. Chinese rms are considering a U. Our analysis of more than U. Understanding these strengths is vital to developing a relationship with Chinese investors.

Target the right Chinese rms. China is a nation of almost 5 million businesses, but not all of these potential investors will be interested in California or serve the states long-term objectives. Te numbers presented in this study provide a starting point for segmenting and prioritizing prospects.

First, our data set highlights that California is the place to go for Chinas private rms. Te bas- tions of Chinese entrepreneurialism, such as Shanghai, Zhejiang, and Guangdong, should therefore be a geographic focus of outreach activities.

Chinese investors are clearly favoring certain sectors in Californiafor example, information technology, renewable energy, hospitality, and electronic equipment. In each of these sectors, state investment o cials should be capitalizing on past successes to make the case to the next generation of Chinese outbound investors: nothing motivates like the knowledge that your competitor is already doing.

Ccalifonia addition to such an approach based on califonia direct foreign investment patterns, Chinas large investors, including sovereign wealth funds and industrial conglomer- ates, are an important potential source of capital.

State leaders should systematically open lines of communication to these investment giants regardless of sector, reaching out to Chinas largest rms and institutional investors. Overhaul the institutional setup for investment promotion. California and the United States as a whole needs institutional change in its investment promotion eorts.

Te traditional hands-o approach is outdated, as o cials from the President to local mayors have acknowledged. Te United States is no longer unrivaled as a destination for FDI, and a new generation of Chinese investors looking abroad needs local partners and facilitators.

Invwstment investors are less familiar with Western culture and business practices, they are rooted in a dierent regulatory environment, and they have relatively little experience operating abroad. Active investment promotion can also help overcome negative preconceptions of the U. As a rst step, we recommend creating a state-level agency with a mandate to lead and coordinate local eorts to promote Chinese investment.

Te establishment of physical presence in China would be another element of such an overhaul, probably starting with Beijing, Shanghai and Guangzhou.

Te integration of relevant stakeholders is another key component, for example, through an advisory board of Chinese and other foreign rms already present in California, or regular confer- ences to improve the business environment for foreign rms. Take a proactive stance on national anxieties. Growth in Chinas U. Narrowly dened security screenings for foreign investments are imperative, and Chinese investment raises legitimate concerns because of a range of general and special considerations.

Much more than documents.

Silicon Valley. Incestment Bay Area ranks as a global financial center and a hotspot for tourism. Industry News Los Angeles. Foreign investment can generate califonia direct foreign investment effects on a local economy: job creation, tax money, technology, new knowledge. Industry experts expect FDI to remain strong in these markets over the next three to five years. Related Projects. Alignment of project goals with fundraising efforts and stakeholder goals for nonprofit associations, foundations, and charities. Attracting foreign investment can be considered a way to boost a local economy. According to industry experts, this influx is expected to continue over the next several years. Each unit of investment must create at least ten new direct or indirect jobs for U. Larger inflows of foreign investments are needed to achieve a sustainable trajectory of economic growth. Overseen by the U. Orange County.