China’s Rise—Threat or Opportunity? The Pacifying Effect of Chinese Foreign Direct Investment on American Threat Perceptions

What drives mass attitudes toward China? Scholars have written extensively on the political consequences of China’s recent integration into the world economy. Yet we lack causal empirical evidence on the relationship between China’s rising outward investment and perceptions toward China. I exploit the agglomeration tendency of foreign direct investment (FDI) to identify the effect of Chinese FDI on American views of China as a threat. I show that the announcement of Chinese greenfield FDI projects lessens concerns about China due to economic sociotropic considerations: Chinese greenfield FDI is believed to generate economic benefits broadcast to the public by the local news media. By contrast, Chinese takeovers of American companies, which do not stimulate the labor market, are not associated with a decline in threat perceptions. Findings are robust to controls for other political and economic conditions such as trade shocks from China and are mediated by respondents’ attachment to national identity.