Foreign Direct Investment in China's High-technology Manufacturing Industries

This paper provides a survey of foreign investment activity in China's high-technology manufacturing industry. In addition, we closely examine the relationship between industrial policy, foreign investment and China's high-technology export success using the development of an indigenous integrated circuits industry as a case study. This paper finds that China's efforts to raise the productivity and innovative capacity of indigenous enterprises is consistent with rising domestic shares of high-technology assets and profits. Nevertheless, foreign-funded enterprises remain the source of most high-technology manufactured exports, primarily from wholly foreign-owned firms. In sum, despite indigenous development, Chinese high-technology manufacturing and exports remain deeply tied to foreign investment.