China’s outward foreign direct investment and exports diversification: an asymmetric analysis

Abstract

PurposeOver the past two decades, China’s outward foreign direct investment (OFDI) has risen remarkably. Whether such an increase affects the Chinese export diversification (ED) is a significant issue that has surprisingly remained unaddressed. This study aims to explain this issue that how OFDI plays a vital role in symmetric and asymmetric effects on its ED.Design/methodology/approachThe authors introduce a robust nonlinear autoregressive distributed lag (NARDL) model. Ironically, the purpose of this study is to analyze the symmetric and asymmetric effect of OFDI on ED.FindingsThe authors propose that growing OFDI would be more advantageous to China, rather than the policies of contraction. Therefore, the study provides valuable policy insights to consider the long-run asymmetric momentum given to ED by China’s OFDI.Originality/valueThe results of this study may seem to be an important newsletter for further policy discussion on how China can catch up on the benefits of ED through OFDI.