Analyzing the Characteristics and Evolution of Chinese Enterprises’ Outward Forward Direct Investment Host Country Network

Brandon J Bethel,Xiaoling Zhang,Decai Tang

doi:10.3390/su13179824

Abstract

With the promulgation of the “Going Global” strategy, Chinese enterprises’ outward forward direct investment (OFDI) moved towards a stage of rapid development. Based on the data concerning projects of Chinese enterprises, this paper establishes a network of OFDI host countries with the industry as the media and analyzes the network and its evolution characteristics by using the complex network method. Results show that the number of network nodes is increasing, and the edges between communities are greater, and the number of countries along the Belt and Road route is increasing. The network is a so-called small-world network. To reduce investment risks, it is necessary to identify the key nodes in the network. Based on the centrality of key nodes in complex networks, the improved “scatter degree” method is used to evaluate the importance of each host node. Results demonstrate that the United States and Australia are the most important countries for Chinese enterprises to invest overseas, followed by Brazil, Canada, Russia, Indonesia, and the United Kingdom (UK). Excluding the UK, all other countries are resource-rich. Thus, it can be seen that the FDI of Chinese enterprises is mainly resource-based investment.

Highlights

Under the development trend of globalization of the world economy, Outward ForeignDirect Investment (OFDI) is undoubtedly an important way for a country to penetrate into the world economic system and develop together with other countries in the world.With the deepening of China’s reform and opening-up policy, China’s economic relations with the world have become closer, especially after its accession to the “going out” development strategy and the “One Belt, One Road” strategy, China’s outward forward direct investment (OFDI) has developed rapidly
If Chinese enterprises have investment in industry S of country i and country j, we believe that there is an edge between the nodes of two countries, represented by aij = 1; if there is no investment in the industry S of the two countries, aij = 0, the undirected relationship matrix A of OFDI host country network of Chinese enterprises can be obtained as follows: A = aij N × N
According to the data from the follow-up survey conducted by the American Enterprise Institute and the Heritage Foundation, there were more than 1600 OFDI projects in

Summary

Introduction

Under the development trend of globalization of the world economy, Outward ForeignDirect Investment (OFDI) is undoubtedly an important way for a country to penetrate into the world economic system and develop together with other countries in the world.With the deepening of China’s reform and opening-up policy, China’s economic relations with the world have become closer, especially after its accession to the “going out” development strategy and the “One Belt, One Road” strategy, China’s OFDI has developed rapidly. Direct Investment (OFDI) is undoubtedly an important way for a country to penetrate into the world economic system and develop together with other countries in the world. In 2003, China’s OFDI was US$2.9 billion, with a total cumulative investment of US$33.2 billion while by 2019, China’s OFDI flow was US$136.91 billion, reigning as the second largest in the world, with a global share of 10.4%, stock of US$219.88 billion, second only to the United States and the Netherlands, with 43,000 enterprises established abroad and investment regions covering more than 180 countries worldwide (source of data «Statistical Bulletin of China’s Outward Foreign Direct Investment» (2003 and 2019)). OFDI can expand exports and alleviate the problem of insufficient resources for domestic economic development, but the degree of impact of OFDI on the home country is closely linked to factors such as technology and resource endowment of the host country [6,7].

Methods

Results

Conclusion