China and the Impact of Economic Globalization: A Complex Tale of Gains and Losses Viewed Through the Lenses of FDI

Abstract

From the time it began to reengage with global economic flows in the late 1970s, and especially after joining the WTO in 2001, China has steadily enmeshed itself in economic globalization (EG). It has become the world’s largest trading nation, one of the largest recipients of foreign direct investment (FDI), and a major player in the international currency regime. At first glance, it is hard to dispute that China has been anything but a beneficiary of EG given the growth, foreign exchange, jobs, technology, and tax revenues it has derived. Yet the reality is far more complex. This analysis delves into two aspects of China’s EG, inward FDI (IFDI) and outward FDI, to provide a better understanding of EG’s impacts. It provides background on China as an IFDI recipient; an overview of its experience as a sender of outward FDI (OFDI); investigates the benefits and gains of IFDI and OFDI for China; ponders China’s management of both; and reviews the negative externalities associated with China’s management of these two flows. This chapter shows the impact of EG has been positive for China, but also that China has experienced downsides and that its management of IFDI and COFDI have generated negative externalities.