The impact of outward foreign direct investment on China’s export: an analysis using two-tier stochastic frontier gravity model

Abstract

This study uses country-level panel data covering 173 countries for the period 2003–2015 and employs the two-tier stochastic frontier gravity model to investigate empirically the impact of China’s outward foreign direct investment (OFDI) on its export. The results of this study indicate that China’s OFDI has a positive and statistically significant influence on promoting China’s export. The results for different country groups with different levels of China’s OFDI stock show that the effect of China’s OFDI on promoting China’s export is much higher in the countries with high level of China’s OFDI stock than in the countries with low level of China’s OFDI stock. The results also show that the country-specific constraints emanating from both the ‘behind the border’ factors and the ‘beyond the border’ factors have played a significant role in China’s export growth.