Abstract
Based on the data of China’s outward foreign direct investment (OFDI) in energy sector to 133 countries from 2005 to 2014, this paper uses a gravity model to investigate the impact of “intimate” relations on China’s OFDI locations in energy sector. We find that the “intimate” relations have significant effects on China’s OFDI locations in energy sector, namely: bilateral senior leaders’ visits, institutional distance, genetic distance, and immigration. Holding other factors fixed, for each one more bilateral senior leaders’ visit between China and the host country, China’s OFDI in energy sector for the host country will increase by 5.44%. If the genetic distance from China and host country increases by 1%, China’s OFDI in energy sector will fall by 1.69%. For every 1% increase in the institutional distance between China and host country, China’s energy OFDI will decrease by 1.09%. For every 1% increase in a country’s immigration to China, China’s energy OFDI will increase by 0.46%. Further, after distinguishing developed and developing countries, we find that compared with developed countries, “intimate” relations have greater impacts on China’s energy OFDI in developing countries. Finally, based on the dominance analysis, considering China’s “intimate” relations with countries along the “Belt and Road” and current locations of China’s OFDI, we find that China should further expand energy investment in countries along the “Belt and Road”.
Highlights
The impact of political and cultural factors on energy investment flows across countries is important for a country’s energy security [1,2,3]
We find that the four “intimate” variables, namely the genetic distance, the number of immigrants, the number of bilateral senior leaders’ visits, and the institutional distance, have significant effects on China’s outward foreign direct investment (OFDI) in energy sector
We find that Kazakhstan, Pakistan, Russia, and Iraq are the countries with the highest FDI in energy sector by Chinese companies, each of them received over 15 billion U.S dollars of China’s energy investment from 2005 to 2014
Summary
The impact of political and cultural factors on energy investment flows across countries is important for a country’s energy security [1,2,3]. This paper further explores to which extent the “intimate” relations between the two countries can affect China’s OFDI in energy sector, such as the genetic distance, the number of immigrants, the number of bilateral senior leaders’ visits, and the institutional distance. This paper focuses on OFDI in energy sector, which is different from the previous literature that mainly focuses on the total amount of OFDI between countries [15,16,17,18] Energy products, such as oil and gas, are essential productive factors for economic development, and important strategic materials related to international politics, regional relations, and global capital markets [7, 19]. The rest of this paper is arranged as follows: the second part is the literature review and hypothesis, the third part is data and empirical design, the fourth part is the empirical analysis, the fifth part is the discussion, and the last part is conclusion
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