Impact of Chinese foreign direct investment on environmental stress in Pakistan: mediating role of technological innovation

The literature on the European Union’s (EU) industrial policy turn has convincingly explained the origins of this paradigmatic shift. However, less is known about how these policies play out on the ground and how member states differ in using them. Existing research highlights significant cross-country variation in industrial policy subsidies within the Union. Scholars and policymakers attribute this to diverging fiscal capacities between member states, warning that pursuing industrial policy through nationally funded state aid risks fragmenting the bloc’s single market. Yet, this puzzling variation cannot be explained through fiscal capacity alone. This article addresses these gaps by mapping and explaining variation between EU member states in their state aid for Important Projects of Common European Interest (IPCEIs), often labeled the “poster child” of the EU’s industrial policy. The article asks: “Under which conditions do EU member states provide state aid for IPCEIs?” It first develops eight political-economic hypotheses from the literatures on industrial policy, geoeconomics, and state aid. These hypotheses are then tested through fuzzy-set qualitative comparative analysis (fsQCA), explaining the variation in the amount of state aid the 27 EU member states provided under the IPCEI framework. The results show that a country’s IPCEI state aid is shaped by the size of its economy, fiscal stress, exposure to Chinese foreign direct investment, past state aid spending, and ideological preferences of its government. Through a nuanced analysis of the determinants of IPCEI participation, the article clarifies how EU industrial policy—in this case, IPCEIs—plays out on the ground.

Purpose Environmental variables like natural resource availability, distance and landlockedness are important locational determinants of foreign direct investment (FDI). This paper aims to determine the effect of environmental variables on African countries’ attractiveness to Chinese FDI. Design/methodology/approach A two-stage approach was used to analyze and explain the attractiveness of African countries to Chinese FDI using averaged annual data from 2005 to 2022. In the first stage of the analysis, this paper employed data envelopment analysis (DEA) to estimate the technical efficiency of FDI flow to 42 African countries. In this case, the estimated technical efficiency represents the attractiveness of countries to FDI. In stage two of the analysis, they applied a Tobit model to analyze the environmental determinants of the estimated efficiency scores. Findings Based on constant returns to scale technology, five of the 42 countries analyzed are technically efficient, and the average efficiency score is 85%. The Tobit model shows that distance has a negative and significant effect, whereas landlockedness has a positive and significant effect on the attractiveness of Chinese FDI to Africa. The effect of natural resource availability is not significant. Research limitations/implications Two major weaknesses can be identified. First, focusing on Chinese FDI does not give a general picture of the efficiency of FDI flow to Africa. Extant empirical literature has shown that Chinese FDI is peculiar owing to, inter alia, the significant component of state-owned enterprises among Chinese MNCs, which makes it sensitive not only to the economic circumstances of host countries but also to China’s political objectives. Empirical analysis focusing on FDI from the global north is, therefore, required for comparative purposes. Practical implications The findings suggest that policies seeking to promote Chinese FDI should focus on ameliorating the negative effects of geographical distance, while acknowledging the confounding effect of sovereign debt. Social implications The findings of this study have implications for the formulation and targeting of investment promotion policies. Through the DEA-based performance ranking, the less efficient or less attractive countries have an opportunity to learn from the more efficient peers. The other implication for policy is that FDI promotion strategies targeting Chinese FDI should focus more on ameliorating the adverse effects of distance as the other environmental variables have no significant influence. Originality/value The use of efficiency analysis to estimate the attractiveness of countries to FDI is still new in the FDI literature. The contribution of this paper is twofold: the use of data envelopment analysis to estimate attractiveness of host countries to FDI, and the use of environmental variables to explain the observed attractiveness and efficiency.

This paper investigates the key determinants of Chinese foreign direct investment (FDI) in South Africa’s critical energy sector, a field characterised by substantial investment opportunities and a persistent supply crisis. Employing a mixed-methods approach, the study combines a quantitative panel data analysis of Chinese FDI determinants across BRICS+ countries (2002–2021) with a qualitative examination of major investment cases in South Africa’s coal and renewable energy sectors. The econometric results confirm that Chinese FDI is driven by a complex mix of market-seeking, resource-seeking and efficiency-seeking motives. The case studies reveal a pragmatic “dual strategy” in South Africa, whereby strategic state-led investments in coal power coexist with market-oriented projects in renewable energy, aimed at exporting Chinese technology and services. The paper concludes that this dual strategy represents not a balanced approach to co-development but rather a flexible mechanism for advancing China’s national geoeconomic interests – allowing it to secure resources while simultaneously capturing new markets for its multinational enterprises.

Comparative studies of foreign direct investment (FDI) infrequently consider how FDI projects from rival powers are evaluated by local citizens. Research also does not explicitly distinguish the influence from the affinity that accrues to investing countries. Recognizing the importance of both influence and affinity, this study examines how citizens react when firms from major foreign powers – and from their prominent rival – invest locally. Using a dataset of over 750 geolocated Chinese and US FDI projects in 23 African countries and connecting those projects to geolocated survey responses, we demonstrate that citizens assign greater influence to a major power whose firms invest locally and reduce the influence they extend to its rival. Most importantly, however, for both Chinese and US FDI, proximity decreases citizens’ affinity for the respective country’s development approach. The findings suggest that citizens often view investing powers more as heavy-handed intruders than supportive partners.

This study examines the relationship between Chinese foreign direct investment (FDI), digital adoption, and labor productivity in the Democratic Republic of the Congo (DRC) over the period 2005–2023. The analysis is motivated by the increasing importance of Chinese investment in African economies and the growing role of digital transformation in shaping productivity outcomes. Using annual time-series data, the study evaluates whether Chinese FDI inflows are associated with labor productivity, measured by output per worker, and whether this relationship remains robust after accounting for digital and structural factors. The empirical strategy is based on ordinary least squares estimation and includes baseline, structural, macroeconomic, and robustness specifications.The descriptive findings show that labor productivity improved over the study period, while Chinese FDI inflows remained highly volatile. At the same time, internet use, mobile subscriptions, insurance development, and capital formation generally increased, indicating broader structural change in the DRC economy. The baseline regression suggests that Chinese FDI inflows are positively associated with output per worker. However, this effect weakens after additional structural variables are introduced. In the final model, internet use and gross fixed capital formation emerge as the most robust predictors of labor productivity, while Chinese FDI inflows and insurance penetration lose statistical significance. Robustness tests further show that Chinese FDI stock is positively associated with productivity, implying that the long-term accumulated presence of Chinese investment may matter more than short-term annual inflows.Overall, the results suggest that the productivity effects of Chinese FDI in the DRC are conditional rather than automatic and depend on complementary domestic factors, particularly digital adoption and capital formation.

This article analyses shifts in Hungary's foreign direct investment (FDI) patterns under Viktor Orbán's government (2010–2023), highlighting a strategic reorientation from US to Chinese investors. Employing network centrality theory within global power competition, the study finds that US FDI stock declined from €15.4 billion in 2014 to €8.8 billion in 2022, while Chinese FDI tripled to €3.5 billion, increasingly targeting strategic sectors such as electric vehicles and battery production. Strategic partnership agreements disproportionately favoured Asian firms relative to their FDI share. Hungary's ‘Eastern opening’ strategy thus coincided with a pivot away from US investment, leveraging US–China rivalry to pursue autonomous economic strategies despite continued Western institutional integration.

The expansion of Chinese foreign direct investment (FDI) in Indonesia, particularly in the nickel downstream sector, has reshaped local political and social dynamics in resource-rich regions. This article critically examines the relationship between Chinese companies and local actors through a case study of Indonesia Morowali Industrial Park (IMIP) in Central Sulawesi. Employing Alvin Camba’s concept of social embeddedness, the study analyzes how Chinese investment is sustained through interactions among firms, state elites, local governments, and civil society. Based on qualitative analysis of policy documents, media reports, and interviews, the findings reveal that IMIP’s operations are strongly embedded within Indonesia’s central government coalition elites, whose political support facilitates regulatory flexibility and minimizes local resistance. This elite alignment enables investment continuity but simultaneously weakens environmental governance and limits meaningful community participation. While IMIP contributes to local economic growth, it also generates social tensions related to labor practices, environmental degradation, and limited technology transfer. Corporate social responsibility and strategic communication are used to manage, rather than resolve, these structural issues. The article argues that Chinese investment in Indonesia is less driven by market efficiency alone than by political embeddedness within a strong regime. This dynamic highlights the asymmetric power relations between investors, the state, and local communities, raising critical questions about the long-term sustainability and social justice of resource-based development under the Belt and Road Initiative.

ABSTRACT African countries are entering into bilateral tax treaties with China for attracting more Chinese foreign direct investment (FDI), although the effectiveness of tax treaties in attracting FDI is controversial. This paper provides the first empirical assessment of the impact of China–Africa bilateral tax treaties on Chinese foreign direct investment for 47 African countries over 2003–2020. Across various robustness checks, difference‐in‐differences results indicate that China–Africa bilateral tax treaties have a positive, and statistically significant impact on Chinese foreign direct investment stocks in the treaty countries in Africa 3 years after the effectiveness of the treaty. The substantial corporate tax incentives offered by African governments to foreign investors, delay the realisation of the positive effect of those treaties on Chinese FDI. This implies that rationalising tax incentives can accelerate the materialisation of FDI benefits from treaties. Moreover, the positive FDI effect of China–Africa tax treaties materialises sooner for resource‐rich countries. These results suggest that China–Africa tax treaties can stimulate Chinese FDI to African countries, especially in resource‐rich countries in the medium and long term, in addition to other potential benefits such as improved information exchange for tax purposes, technical assistance in combating tax evasion and strengthened economic and diplomatic relations with China.

ABSTRACT: Since 2013, China has been the main foreign direct investor in African countries. Such presence has been remarkable and noticeable through numerous infrastructure projects in Africa and facilitation of Africans' access to advanced manufacturing products, which they did not have before such as mobile phones, computers, cameras, and others. But the empirical regularity of such growth impact of Chinese foreign direct investment (FDI) has been missing. In this study, we specified linear and nonlinear models and applied them to panel data of 47 African countries over 2003–2022 using the dynamic panel data estimation – two-step system GMM to assess the Chinese FDI impact on their economies. Linear models are the most used but are unable to capture complex dynamics of the growth-FDI relationship such as the U-shaped, inverted U-shaped, and S-shaped formulations. The results of estimations indicate that Chinese FDI inflows did not affect significantly economic growth of African countries in both specifications. Further, FDI inflows from the rest of the world, human capital, its interaction with Chinese FDI, domestic investment, perception of fight against corruption, and perception of political stability did not affect significantly economic growth of those countries either. Trade, inflation, government expenditure, and financial development were the main drivers of their economic growth. Trade affected positively and significantly their economic growth, with a 1% increase in its ratio to GDP resulting in 0.01% to 0.02% increase in their per capita GDP growth rate. In contrast, an increase in inflation affected negatively and significantly their economic growth, with a 1% percent increase in their inflation rate resulting in a 0.01% decrease in their per capita GDP growth rate. Further, a 1% increase in the ratio of government expenditure to GDP caused a significant decrease of 0.04 percent of their per capita GDP growth rate. Also, a 1.00% increase in the ratio of credit to private sector to GDP in those countries resulted in a decrease in their per capita GDP growth rate of 0.01%. African countries have not yet met the preconditions for the FDI to affect their economies. Their absorptive capacity is very weak due to extremely low level of human capital, weak domestic investment, macroeconomic instability, backward financial sector, inefficient government, and low economic persistence over time. Policies to improve their readiness to FDI include massive investment in secondary education and vocational training, institutional capacity building to mobilize domestic saving, contractionary fiscal and monetary policies to reduce inflation and inefficient government expenditure, and lenders' credit default risk compensation.

This study compared FDI inflows on infrastructural development in Nigeria from three major trading and investing partners - the United States (USA), the United Kingdom (UK), and China. The study used time series data from 2005 to 2024, sourcing data from the Central Bank of Nigeria Statistical Bulletin, World Bank’s Development Indicators, and the African Development Bank database. The study employed preliminary tests of Augmented Dickey-Fuller and Phillips-Perron unit root, while the main estimation technique was the Autoregressive Distributed Lag Model. The dependent variable is access to electricity, proxied for infrastructural development, while the independent variables include Chinese foreign direct investment, UK’s foreign direct investment, USA’s foreign direct investment, government effectiveness, financial development, gross domestic product growth rate, and exchange rate. The series considered exhibits a mixed order of integration, while the bounds test demonstrates the existence of a long-run relationship among the variables. The empirical findings indicate substantial variation in how FDI affects infrastructure, contingent upon the source country and the quality of institutions. Chinese FDI has a significantly negative effect on electricity access, worsened by governance inefficiencies, while UK FDI consistently shows a positive impact, enhanced by effective governance. US FDI has a persistently negative influence, indicating weak institutional frameworks. The study highlights the pivotal role of institutional quality in shaping the effectiveness of FDI in promoting infrastructure development in Nigeria. Also, among other conclusions, enhancing governance structures is crucial for improving the effectiveness of FDI; this can be achieved by strengthening transparency and regulatory frameworks.

ABSTRACT Much scholarship finds a negative but inconsistent statistical relationship between host‐state terrorism and overseas foreign direct investment (FDI). However, empirical studies generally have not investigated terrorism in the context of Chinese overseas FDI. Comparing United States and Chinese overseas FDI for up to 107 developing countries from 2004–2018, and using a Two‐Stage‐Difference‐in‐Difference approach as well as a dynamic panel data analysis approach (i.e., the System General Method of Moments), we find a negative and at times statistically significant association between terrorism and U.S. FDI and a positive and frequently statistically significant relationship between terrorism and Chinese FDI, and this is true for both Chinese public and private investors. We argue that the U.S. and Chinese governments have different effects on overseas FDI, where the U.S. has a limited impact while China often encourages its firms to tolerate risk. Our research suggests that the nature of home governments affects the risk perception of their overseas investors.

This study examines the implications of China’s Foreign Direct Investment (FDI) on the performance of the Philippine stock market from 2014 to 2024. Utilizing a descriptive quantitative research design, it analyzes trends in Chinese FDI inflows alongside market participation, investor profiles, and account growth—focusing on both local and foreign investors. Secondary data were obtained from the China Statistical Yearbook and the Philippine Stock Exchange, Inc. annual reports. The study applies statistical tools, including mean, frequency, percentage, and regression analysis, using SPSS to ensure analytical accuracy. The results show that Chinese FDI followed an upward but cyclical trend that aligned with shifts in global and domestic conditions, while the Philippine stock market saw rising local participation and rapid digital account growth. A significant positive correlation was found between Chinese FDI and total market accounts, and a moderate positive link emerged with market performance, indicating that foreign capital supports liquidity and investor confidence. Although FDI had only modest effects on investor profiles, it contributed to a more active investment environment. These findings support recommendations to strengthen FDI governance, diversify Chinese investments into high-impact sectors, enhance digital market infrastructure, and promote partnership-driven, long-term investment strategies.

This study examines the effects of Chinese foreign direct investment (FDI) and political events on firm-level innovation in African recipient countries using data from the World Bank Enterprise Surveys during 2018–2020. The findings demonstrate that Chinese FDI significantly improves innovation outcomes among African firms. Political events in host countries not only directly stimulate innovation but also amplify the positive influence of Chinese FDI. These results indicate a complementary, rather than substitutive, relationship between political and market factors in the allocation of innovation resources. By highlighting the interactive role of political dynamics and market mechanisms, this research contributes to institutional economics and extends the literature on innovation in emerging economies. Policy implications are proposed to guide African enterprises in fostering sustainable innovation through the effective use of Chinese FDI.

Impact of Chinese foreign direct investment on energy demand and stability: The Belt-Road Initiative as conditioner.

ABSTRACT This article examines the heterogeneity and drivers of Chinese manufacturing foreign direct investment (FDI) in Africa through a comparative analysis of Angola and Ethiopia. Drawing on 8 years of fieldwork (2015–2023), it develops a typology distinguishing market‐embedded firms from global production network (GPN)‐integrated firms, linking firm characteristics to host‐country institutional and policy contexts. This relational–institutional approach addresses limitations in conventional FDI frameworks that overlook variation within similar ownership categories and the influence of local institutional environments. The analysis shows how firm strategies, ownership structures and integration into global or local markets interact with sectoral conditions and industrial policies to shape divergent investment trajectories. Ethiopia's structured, export‐oriented strategy has attracted GPN‐integrated light manufacturers, while Angola's post‐war, market‐driven environment has favoured domestically oriented and diaspora‐led ‘translocal’ enterprises. By integrating firm‐level diversity with host‐country contexts, the article contributes to debates in FDI, GPN and Global China scholarship, offering insights for targeted industrial policies that maximise developmental outcomes.

This study investigates the productivity impact of Chinese foreign direct investment (FDI) within Nigeria’s Free Trade Zones (FTZs), focusing on how Chinese investment, exports, and imports influence Nigeria’s overall productivity growth. The research employs a quantitative design using secondary data drawn from the United Nations Conference on Trade and Development (UNCTAD), the National Bureau of Statistics (NBS), and the Ministry of Commerce of the People’s Republic of China. The data were analyzed through Ordinary Least Squares (OLS) regression to determine the relationship between Chinese economic activities and productivity outcomes in Nigeria’s FTZs. Results reveal that Chinese FDI and imports from Nigeria exert no significant effect on productivity. In contrast, Chinese exports to Nigeria show a positive and significant impact, suggesting that increased trade inflows contribute to productivity enhancement. The study concludes that trade relations, rather than investment inflows alone, are key drivers of productivity improvement. Strengthening Nigeria’s FTZ regulatory framework, particularly regarding transparency, accountability, and labor and environmental standards, can maximize the developmental benefits of Chinese engagement.

This paper analyzes Chinese FDI in Vietnam (2014 - 2024), assessing its effects on growth, environment, and labor. While contributing to industrialization and exports, it also poses sustainability and dependency risks. The study suggests policy directions to enhance benefits and reduce harm. Findings support Vietnam’s strategic goals in green and inclusive development.

Abstract Ports are strategic nodes in trade & supply chain logistics, energy generation, storage & transport, industry activity, and socio-economic impact, and have long been considered critical infrastructures. They are also capital-intensive and benefit significantly from the influx of substantial foreign direct and equity investments. For this reason, ports feature prominently in new and amended investment screening mechanisms (ISMs) that allow EU governments to screen and potentially block foreign direct investment (FDI) on grounds of security or public order. We compare the involvement of Port Management Bodies (PMB) in the political process leading up to domestic and EU regulation on investment screening and analyse how PMBs manage their concession processes in response to changing legislation. Despite the current general rise in geopolitical tensions in international economic relations and similar exposure to incoming state-led Chinese FDI, we find that investment screening in ports varies significantly across the EU, and Port Management Bodies (PMBs) respond differently to government investment screening. We show that existing port governance structures work to mediate PMB responses to FDI screening, in particular as a result of their degree of decisional and financial autonomy: Centralized ‘Latin’ port management bodies are more likely to internalize investment screening, while city-controlled and/or more decentralized ‘Hanse’ PMBs tackle it as a new and external element to their investment decision processes. We elaborate on these differences in great detail in a multiple case study setup involving the Western Ligurian Sea Port Authority in Italy, the Port of Antwerp-Bruges in Belgium, Hamburg Port Authority in Germany, and Port of Rotterdam Authority in the Netherlands. While all European PMBs find themselves caught in the relative quiet of the eye of a geopolitical storm, all of them may well have to brace for coming headwinds when government screening authorities are tasked to intervene.

What is the relationship between Chinese foreign direct investment (FDI) and human rights in host countries? As China has emerged as one of the world’s leading international investors, examining the determinants of FDI inflows from a non-democratic and non-Western power offers valuable insights into a central theoretical puzzle: Does repression attract FDI? This paper engages with theories on FDI and human rights, focusing on the interplay between repression, political stability, and natural resource rents and how these factors shape the investment preferences of foreign actors. The central hypotheses—stability maintenance and extractive repression—propose that countries exhibiting higher political stability and greater reliance on natural resource rents are more likely to attract Chinese outward FDI. Recipient governments may be incentivized to employ coercive measures to foster a stable investment climate. Using regression analysis covering the period from 2003 to 2023, alongside two country case studies—Cambodia and Indonesia—this study investigates the conditions under which human rights conditions in host countries are associated with Chinese FDI inflows. Most importantly, the findings reveal two distinct dimensions of Chinese FDI, illustrating how it can be drawn to repressive recipient countries in rentier and non-rentier state contexts. By shedding light on the dynamics of Chinese investment in Southeast Asia, this paper contributes to the broader literature on China’s global engagement and FDI.