U.S. FDI In China Post 2008 Global Financial Crisis: Analysis Of Motivating Factors

U.S. firms have always been attracted to China and its market. U.S. FDI into China in 2000 was at 11.1 billion USD, and continued to grow at a steady pace to 29.7 billion in 2007, a total growth of 18.6 billion in eight years. However at the onset of the 2008 global financial crisis, U.S. FDI noticeably spiked in China, reaching a total of 53.9 billion, a growth of 24.2 billion in a single year taken at the historical cost level. With such a high spike in growth, it becomes important to understand the underlying factors behind it.This paper will analyze the new governmental policies by both countries post crisis, the four trillion stimulus by China and quantitative easing by the U.S. to determine its impact on U.S. FDI towards China. Changing macroeconomic factors including the exchange rate between the Yuan and the Dollar, along with China’s GDP growth rate will also be analyzed. This paper will compare and analyze data collected from 2008 till 2013.This study found that the policies and changes introduced by China after 2008 global financial crisis such as the four trillion stimulus, GDP growth rate, and the exchange rate of the Yuan help created an environment which attracted U.S. FDI to China. U.S. QE after the crisis also motivated firms to allocate their investment overseas, such as in forms of FDI. Ultimately, this paper found that there is a strong relation between the new policies by both countries as well as the change in macroeconomic factors had a positive impact to motivate U.S. FDI into China.