The location choice of Chinese investment in the United States: Industrial agglomeration, ethnic networks and firm heterogeneity

China’s outward foreign direct investment (FDI) is different from traditional FDI in various ways, for example being rooted in “Guanxi” in Chinese culture, influenced by government, and located in developed economies where they have limited ownership advantages compared with local firms. Chinese investment in the United States (the U.S.) is an example of how the location is influenced by economic factors, social linkages, as well as geopolitical events, such as the U.S.-China trade conflict, which deserves more academic attention. It is such a complex phenomenon that cannot be fully explained by traditional FDI theories, which mainly focus on economic factors. In this paper, we illustrate the historical development, distribution and firm heterogeneity of Chinese investment in the U.S. from 2000 to 2020, and use a conditional logit model to investigate the location factors. Our study reveals that the number of Chinese investment projects in the U.S. peaked in 2017 and has declined year-over-year since then. These projects are mainly located along the East and West coasts of the U.S. and around the Great Lakes, with the largest numbers in California and New York. Previous Chinese investment agglomeration and ethnic networks both influence the location choice of China’s outward FDI, even when controlling for regional attributes and economic embeddedness. In terms of firm heterogeneity, Chinese firms that enter the American market with greenfield investment modes, state-owned enterprises and firms in high-tech sectors are more likely to follow previous Chinese investment, but place less emphasis on Chinese ethnic linkages, implying that previous Chinese investment agglomeration can replace the role of Chinese ethnic networks for these firms. Finally, the U.S.-China trade conflict has significantly lessened the active role of Chinese ethnic networks and has reduced Chinese investment in states with higher industrial output.