The United States is the largest destination of foreign direct investment (FDI). This article analyse the reason why the United States is so attractive to foreign investors. The analysis can be divided into two parts. In the first part, the author discusses the open economy of the United States in the global environment. The political and economic environment enables the United States to absorb large amount of FDI. The second part focuses on domestic level. The United States is the third largest country in both size and population. It also has rich natural resources, and occupies 27% of the world’s coal reservation. The huge domestic market enables the United States to attract and digest FDI. Another important factor of FDI flows is the financial markets of the United States. At the end of the article, the author discusses the challenges the United States faced especially after the Global Financial Crisis (GFC).
2. Foreign Direct Investment in the United States
3.1 Open Economy
The US’s engagement in the world economy has accelerated since the 1920s (Cooper, 1985). Little barriers were set to foreign direct investment, and moreover, the high level of industrialization in the United States have attracted large amount of investment (Graham & Krugman, 1995). After the end of WWII in 1945, the United States and the former Soviet Union became two superpowers (Gilpin & Gilpin, 1987). The bipolarized world political system has greatly influenced the world economy. States tended to turn to one of the superpowers to remain secure in the world system. Since the Cold War period, the United States put great emphasis on forming institutional framework and establishing international cooperation.(Gilpin & Gilpin, 1987) The US foreign policy had a great influence on its economy. The policy attracted FDI into the US market and also increased the US export volume. From then on, the United States relies much on foreign investment....