The Impact of China’s OFDI on Inclusive Growth across Countries

Abstract

Since the twentry-first century, deepening globalization has not only promoted the prosperity of international trade and investment and has led to many global crises. Faced with the looming threats, the Asian Development Bank first proposed the concept of “Inclusive Growth”, aiming to foster more inclusive and beneficial economic growth and reduce income disparity. As a substantial, lasting international investment, often with specific strategic purposes, FDI, especially China’s OFDI, includes not only capital investment but the provision of management, technology, and equipment, thus will affect the host countries’ pattern of economic activities and further have the consequent impact on the economy, society, and environment of the host countries. This paper uses a panel two-way fixed effects model to explore whether China’s OFDI promotes inclusive growth in host countries. It shows that China’s OFDI significantly promotes inclusive growth in host countries, and the instrumental variable method results support the findings’ robustness. Further, the heterogeneity analysis shows that the effect of China’s OFDI is mainly concentrated on coastal countries, members of the OECD, and high-income economies. This study is important for a deeper understanding of the impact of China’s OFDI on host countries’ inclusive growth worldwide.