Brookings published on 6 May 2026 a study titled "Foreign Investment Is Not Making Friends for China--or the US" by John F. McCauley, University of Maryland, Margaret M. Pearson, John L. Thornton China Center, and Xiaonan Wang, City University of New York - Baruch College.
Drawing on over 750 Chinese and American foreign direct investment (FDI) projects in 23 African countries, the research challenges the assumption that it generates not only economic returns but also goodwill in the local community. While proximity to a major power's investment increases its perceived influence in local communities and undermines that of its adversary, it also decreases affinity for the investing power.
This reputational cost is not unique to China; U.S. investment triggers a strikingly similar backlash. Unmet expectations around jobs and local economic benefits, heightened perceptions of corruption among local officials, and concerns about external influence erode the soft power dividends that both powers anticipate. China and the United States must recognize that investing abroad can sabotage goodwill if projects are not constructed with local economic development in mind.
Comment: While the study offers a useful cautionary note about the impact of FDI, it is based on a narrow definition of the value of investment. FDI can have positive effects on the economy that go well beyond the impact on the community in close proximity to the investment project. FDI can add to a country's GDP, increase tax revenue, and have downstream economic benefits not captured in the nearby community. While the negative results on reverse model preference identified in the study are revelatory, they are modest and probably skewed by a small number of egregiously flawed investment projects.
