California and foreign direct investment (FDI)
California is a major recipient of foreign direct investment (FDI) within the United States and globally. This translates into significant economic benefits for the state:
- Job creation: Foreign-owned enterprises (FOEs) support hundreds of thousands of jobs in California, a number that continues to grow year-over-year.
- Wage growth: FDI contributes billions of dollars in wages to Californians.
- Increased Exports: It boosts US exports, strengthening the state and national economy.
- Manufacturing growth: FDI helps build up US manufacturing capabilities, particularly within California’s robust industrial base.
- Knowledge & Technology Transfer: It brings in new skills, technologies, and research, fostering innovation and productivity.
Key statistics (2025)
- Number of FOEs: 18,963.
- Jobs supported: 814,102.
- Increase in jobs from 2024: 14,018.
- Wages paid: $89 billion.
Major sources of FDI
Historically, countries like Japan, the United Kingdom, France, Canada, and Germany have been key investors in California. The United Kingdom has recently emerged as the top source of FOE employment, demonstrating a shift toward higher-value, service-driven industries, while Japan continues to lead in the number of establishments.
Industries attracting FDI
FDI flows into various sectors of the Californian economy. While manufacturing continues to be a dominant sector for FOE employment, professional and business services have seen significant job growth. Other key sectors include:
- Technology & Innovation: California’s status as a global hub for innovation attracts investment in areas like renewable energy, aerospace, life sciences, biotech, and advanced manufacturing.
- Trade & Logistics: The state’s leading trade and logistics infrastructure (ports, rail systems, airports) makes it attractive for investment in related fields.
- Other Industries: Tourism, agriculture, financial services, healthcare, and entertainment also attract FDI.
Challenges to attracting FDI
While California is a leading recipient of FDI, it faces challenges such as high living costs, taxes, and a stringent regulatory environment, which have led some businesses to explore opportunities in other states. Additionally, global economic uncertainties and restrictions on certain outbound deals have impacted FDI in California’s major cities.
Government initiatives
California’s Governor’s Office of Business and Economic Development (GO-Biz) actively works to attract FDI and support businesses in the state by:
- Providing resources and incentives: Including site selection assistance, logistical support, demographic and wage data, and information on tax credits and training programs.
- Engaging in international promotion: Participating in events like the SelectUSA Investment Summit to highlight opportunities in California to a global audience.
- Collaborating internationally: Working with groups worldwide and supporting agreements between California and foreign governments to foster economic partnerships.
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