FDI has no impact on national governments.

According to my theory, national government and local governments tend to have different agendas when it comes to adversarial FDI with national government caring more about national security, macro-economic wellbeing at national level and the national leaders’ political survival and local governments care more about local economic wellbeing and local officials’ political survival. Compared to foreign trade, FDI are more local-oriented and less national-oriented as fixed assets are more involved locally with local governments and local communities. This makes FDI more likely to serve as a shared constituency between the host and home countries of FDI. In the US-China case, the Chinese FDI have received quite different treatments between the national government and local governments, particularly during the trade war period. First, at the national level, the Trump administration has strengthened its scrutiny on Chinese FDI via the Committee on Foreign Investment in US (CFIUS). With the trade war escalating, however, the Chinese investment in the US has been decreasing. China’s direct investment in the U.S. dropped “more than 90 percent from the same period in 2017 and the lowest level in seven years”.9 This dramatic drop is not only caused by the China’s crackdown on outward investment for reducing its domestic financial risks, but also caused by America’s “increasing scrutiny on Chinese acquisitions through the Committee on Foreign Investment in US (CFIUS).10” CFIUS is an interagency body of the executive and legislative branch that advises the president on national security issues related to foreign investments. CFIUS has the power to block foreign acquisitions of domestic businesses and technology if it found that those acquisitions would threaten US security. CFIUS has rejected several Chinese acquisitions of U.S. firms (or foreign firms with assets in the U.S.) in sensitive areas since 2016 (Pi 2018). According to Biglaiser et al. [39], the blocked acquisitions included electronics firm Phillips (2016), semiconductor manufacturer Aixtron (2016), Global Communications Semiconductor (2016), Lattice Semiconductor (2017), and MoneyGram (2018), a money transfer business (Jackson 2018). According to Rhodium group’s estimation, “deals worth more than $8 billion were abandoned in 2017 due to “unresolvable CFIUS concerns (Jilani and Cheng 2018).” According to Jilani and Cheng [40], the US congress is expected to be further pressured by the defense department to strengthen the power of CFIUS and restrict the inflows of Chinese FDI for the purpose of national security.