Enterprises Heterogeneity, Bilateral Investment Treaty (BIT) and the Determinants of Chinese Firms’ Outward Foreign Direct Investment (OFDI)

Abstract

This paper analyzed Chinese enterprises’ outward foreign direct investment (OFDI) from the perspectives of Bilateral Investment Treaties (BIT) and enterprise heterogeneity. Firstly, in terms of BIT, we found that the existing literature was mainly focused on BIT and developed countries’ investment in developing countries as the research subject, and rarely discussed the role of BIT in OFDI by developing countries. In addition, in terms of enterprise heterogeneity, due to a limited dataset, the previous research could not be used to accurately understand Chinese investment’s ultimate objective, and could not be used to differentiate between differently owned enterprises. As a result, this paper uses a Multiple linear regression model to select data from Chinese foreign-investing enterprises from 2005-2016 provided by China Global Investment Tracker. We find that the signing of the BIT can promote Chinese enterprises to invest in the signatory countries. However, its role on the investment shows features differently due to the various ownership of firms. Thanks to the support of the home country system, BIT significantly promotes the foreign investment of state-owned enterprises, with little promotion for the non-state-owned enterprises.