Shifting gatekeeping: U.S. political debate regarding Chinese foreign direct investment, 2012-17

This thesis analyzes the evolution of U.S. gatekeeping – herein, policy debate and development – regarding a prominent type of inbound Chinese foreign direct investment (FDI) from 2012 to 2017. This six-year period saw massive change in the bilateral investment relationship, characterizing both the volume of Chinese strategic asset-seeking acquisition attempts in the U.S., and American reception to such attempts. However, existing scholarship focuses on why Chinese acquisitions are controversial in advanced economies, rather than how and why they became controversial over time. Across three studies, this thesis addresses this gap. Using process tracing drawing on hundreds of government and business documents and 37 semi-structured elite interviews, it investigates how and why U.S. gatekeeping shifted toward Chinese acquisitions among the foreign policy executive (FPE), defined as the set of congressional and executive branch entities with purview over China and investment issues.
It identifies 2016 as a turning point in gatekeeping toward Chinese acquisitions: relatively unsystematic and neutral in 2012-15, FPE attention toward such flows became widespread, negative, and accompanied by calls for policy reaction in 2016-17. This thesis shows that China’s rising material capabilities relative to the U.S. alone are insufficient to explain this evolution. Rather, a neoclassical realist theory in which domestic-level processes affect policymaker behavior in the face of systemic change usefully captures shifting gatekeeping. Certain leader beliefs regarding China and its changing material status vis-à-vis the U.S. shaped perceptions of Chinese acquisitions, while evolving state-society relations – or the repositioning of the American business lobby toward bilateral relations – liberated (and in some cases, encouraged) the FPE to act on these new perceptions and develop changes to U.S. investment review policy.
FPE perceptions toward Chinese acquisitions soured in 2016 because beliefs emerged that China was enhancing rather than reducing its practice of party-state capitalism, was increasingly technologically innovative rather than imitative, and was an adversary threatening U.S. defense interests in the Asia-Pacific rather than a potential regional partner. Societal interests translated perceptions into policy. By late 2017, what became the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) was proposed with high-level, bipartisan co-sponsorship to expand U.S. investment review policy in response to China-related concerns. Muted in its defense of bilateral openness due to a darkening paradigm in China, the U.S. business community shaped policy decision-making and implementation by passively (and in the case of the semiconductor industry, actively) encouraging the FPE to act on soured perceptions. Revealing the influence of domestic developments on one element U.S. China policy, findings advance scholarship on the politics of Chinese FDI in the U.S. and shed light on future drivers of the 21st century’s most important bilateral relationship.

Keywords: acquisitions
international political economy
process tracing
strategic competition
FDI
geopolitical competition
M&amp;A
content analysis
neoclassical realism
qualitative analysis
U.S.-China
international relations
Advisor: Irwin Crookes, P