Abstract
This paper established a combined dataset from 2004 to 2015 for 129 host countries and matched them with 1193 Outward Foreign Direct Investment (OFDI) events by Chinese listed firms. Four variables were designed to proxy the agglomeration effects of Chinese OFDI at both an industry and country level. Probit and FGLS estimation methods were used to analyze whether the Chinese listed firm location choices were affected by the agglomeration level. It was found that the agglomeration effect of Chinese OFDI on host country selection was obvious, as Chinese firms were often found to follow other Chinese firms and invest in host countries where Chinese investment was concentrated; however, it was also found that Chinese firms did not choose countries where there was a high concentration of non-Chinese FDI. The agglomeration effect on Chinese OFDI industry selection was also significant. Firms were found to invest in industries that already had large Chines OFDI agglomeration or high host-country industrial agglomeration. Further investigations found that the “Belt and Road” Initiative (BRI) was effective in guiding location decisions. Firms were found to invest more along the “Belt and Road” route after the BRI was launched; however, large State-owned listed firms with higher leverage but lower productivity and profitability were found to more often invest along the BRI routes.
Highlights
The “Belt and Road” Initiative (BRI) was launched in 2013 as a consensus-based multinational cooperative framework that relies on existing Chinese dual multilateral mechanisms and existing regional cooperative platforms in particular countries
This result was consistent with existing literature that indicated that Chinese firms preferred to invest in countries with higher Chinese Outward Foreign Direct Investment (OFDI) concentrations [21,27]
In Asia and Europe, firms tend to invest in countries that have less Chinese investment agglomeration; the result could be explained as a “competition avoidance” effect because these two continents are already the dominant destination for Chinese OFDI (16 out of top 20 Chinese OFDI destinations by stock in Appendix A Table A2 located in these two continents)
Summary
The “Belt and Road” Initiative (BRI) was launched in 2013 as a consensus-based multinational cooperative framework that relies on existing Chinese dual multilateral mechanisms and existing regional cooperative platforms in particular countries. Borrowing from the ancient Silk Road, the BRI aims to actively develop economic cooperation with the countries along the nominated sea and land routes through the development of political mutual trust, economic integration, and cultural inclusion. Using a large dataset constructed from detailed individual firm OFDI events information, it was possible to measure the effects of the country of origin and the industry on a firm’s location choice. It is examined whether firms tend to invest more in OBOR countries after the BRI.
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