Abstract
This paper examined the location choices of Chinese outward FDI (OFDI) from 2005–2016 with a particular focus on the Association of Southeast Asian Nations (ASEAN) countries. It was found that Chinese OFDI in ASEAN countries was generally focused on areas that had large potential markets and low tax rates. Unlike previous studies, it was found that primary and secondary industry labor costs were the main motivators rather than resource-seeking. The business environment in the host countries was also found to have positive and significant effects on Chinese OFDI location choice for the agricultural, mining, construction, and information industries. The insights in this paper could provide useful suggestions for both governments and investors.
Highlights
The world economy recovered slowly after the international financial crisis in 2008, with the past few years seeing a rise in de-globalization and trade protectionism
Unlike scenarios in which only a firm’s outward FDI (OFDI) motivations are considered as affecting location choice, this paper examined the effects that firm motivations, country institutions and macroeconomic characteristics collectively had on OFDI location choices in different industries, which were determined based on a dataset with 31 variables from 10 Association of Southeast Asian Nations (ASEAN) host countries from 2005 to 2016
The motivational variables, which were statistically significantly correlated for Chinese OFDI in previous studies, were not found to significantly affect the total or industrial Chinese OFDI in ASEAN countries
Summary
The world economy recovered slowly after the international financial crisis in 2008, with the past few years seeing a rise in de-globalization and trade protectionism. Understanding Chinese OFDI location choices in specific industries can lead to meaningful policy suggestions for both the host countries and the home country. Home country investors (in this case China) can understand the various factors affecting the OFDI in each industry and select the most appropriate OFDI host countries, and in the host countries, the government can work on providing the specific factors needed to attract more Chinese OFDI to particular industry. As most existing studies have analyzed Chinese OFDI location choice determinants based on aggregate OFDI data [3,4,5,6,7,8,9], the specific determinants in each industry have not been distinguished. Amighini and Franco [13] analyzed the Chinese OFDI automotive sector drivers from 2006–2011 and found that it was driven mostly by host country market size and targeted lower income countries
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