Chinese Foreign Direct Investment Research Articles

Mitigating social-ecological risks from the surge in China\u2019s overseas investment: an Indonesian profile

Rapid development has become a global priority as countries strive to meet the UN Sustainable Development Goals by 2030. Sustainable development is crucial for increasing human well-being in emerging economies while avoiding perverse outcomes on livelihoods, biodiversity, and ecosystem services. China’s Belt and Road Initiative (BRI) promises to help countries reach their national goals for economic growth, trade, and development, but there remain widespread concerns over how this boom in Chinese foreign direct investment (FDI) will impact social-ecological systems. Here, we discuss the risks implicit in BRI-related FDI projects to ecosystems and local communities, and how these risks can be mitigated or exacerbated by national governance of BRI projects and national development policies. We frame our discussion around Indonesia, where convoluted governance of some of the largest Chinese FDI projects may reduce accountability, and a recent job creation law brings risks of rapid unsustainable development practices across this biodiversity hotspot.

Chinese Investments in Brazil: Economic Diplomacy in Bilateral Relations

Abstract The People’s Republic of China has consolidated its status as a great power and strengthened its presence in different regions of the planet. In accordance with its economic development strategy, Beijing’s growing bond with Latin America is part of China’s need to guarantee access to raw materials and energy resources. In this framework and through economic diplomacy, China has strengthened its trade relations, as well as loans and investments in most of the region’s countries.Brazil is an example of this relationship pattern, as one of China’s most important partners and top investment destination in Latin America. It became Beijing’s top commercial partner in 2012. This paper will analyse the composition and evolution of Chinese foreign direct investment (FDI) in Brazil between the years of 2004 and 2020. In order to do so, we will study the main projects carried out by the country, as well as the characteristics of the Chinese companies (state or non-state) that participated in the process, in order to understand their most important features. Likewise, we will analyse the articulation of the Chinese FDI with its trade flows. We will start from the premise that Chinese investments in Brazil are directly linked to Beijing’s strategic interests, while at the same time guided by market logics that try to maximise profits. In this vein, within the framework of the ‘going out strategy’,state companies play a fundamental role.

CAN CHINA’S FOREIGN DIRECT INVESTMENT CAUSE ECONOMIC GROWTH IN ASEAN?

This paper uses systematic panel data methods to scrutinize the impact of China’s foreign direct investment (FDI) on economic growth in eight Association of Southeast Asian Nations (ASEAN) countries from 2004 to 2018. The findings indicate a statistically significant causal association between these countries’ economic growth and Chinese investment, which shows that China’s FDI is not a cause but rather a result of the economic expansion. Specifically, the results show that there was a causal chain running from fixed capital to Chinese FDI, through trade openness, in the relatively wealthier ASEAN countries; also, there was a causal chain running from economic growth to Chinese FDI, through trade openness, in relatively poorer ASEAN countries.

Research on the Influencing Factors, Location Selection and Risk of Chinese Foreign Direct Investment ——Based on the Empirical Analysis of 52 Countries along "The Belt and Road"

In this paper, we analyzed the data of 52 countries along “The Belt and Road” by applying the panel random effects model, and explored the influencing factors of Chinese foreign direct investment location choice, and on the basis, analyzed the risk of Chinese foreign direct investment. The empirical results show that the quality of labor force in the host countries, the investment in fixed assets, the degree of opening up, the participation in the multilateral and bilateral mechanisms, and the bilateral relations have a significant facilitating role on Chinese foreign direct investment. However, the degree of industrialization in the host countries and the distance between Beijing and capitals of other countries have a negative effect on Chinese foreign direct investment. In order to enhance the competitiveness of Chinese multinational investment enterprises and effectively prevent the risks of output foreign investment, we should take the following measures: Government, industry, university and research institutions should mutual collaborate, and strengthen the research on countries along “The Belt and Road”; We should develop and maintain good bilateral relations with countries along “The Belt and Road”; We should improve Chinese export credit insurance system and improve the level of risk protection.

Foreign direct investment in Latin America and the Caribbean – the evolution of flows

The article examines the flows of foreign direct investment (FDI) in the countries of Latin America and the Caribbean (LACB) for the period from 2010 to 2020. The sources of capital inflows, their structural components, as well as the distribution of attracted investments by sectors of the recipient countries ' economies are analyzed. Quantitative indicators of FDI inflows and outflows for individual countries and for the region as a whole are presented, highlighting general trends. The trend of a decrease in the volume of attracted FDI in the LACB is emphasized. It is concluded that the decrease in foreign direct investment in South American countries confirms the direct dependence of FDI inflows on macroeconomic conditions and fluctuations in world commodity prices. Changes are noted in the approaches of multinational corporations to invest capital abroad in the context of the COVID-19 pandemic in favor of their local or cross-border use. The assessment of the actions of the authorities of the states of the region to attract foreign investment is given. The article examines the situation in the field of unresolved investment disputes involving the countries of the region and its impact on investment attractiveness. The role of Chinese FDI in the region, including its effectiveness in political terms, is considered separately.

Buying-up Europe No More? How the European Union has Responded to the Challenges of Chinese Foreign Direct Investment

towards Chinese outward foreign direct investment (OFDI) has evolved over the past decade. I contend that the EU was quite receptive to Chinese OFDI at the beginning of the decade, due to both ideological leanings and the economic context of a post-crisis Europe. I then illustrate how the EU slowly adopted a more guarded and critical approach towards Chinese OFDI. This paper will focus specifically on four key issues surrounding Chinese OFDI policy: national security, technology transfers and IP theft, state support for Chinese firms, and market access, ultimately arguing that bilateral investment treaty (BIT) negotiations and the new EU investment screening mechanism are the main policy levers being used to address these concerns. For the sake of this paper, I will use the OECD’s definition of OFDI.

Does Chinese Foreign Direct Investment Improve the Welfare of Africans?

ABSTRACT This paper assesses the impact of Chinese foreign direct investment (FDI) on welfare in African economies using recently available data on Chinese FDI in 52 African countries between 2003 and 2018. Using fixed effects and instrumental variable (IV) estimations, we find that Chinese FDI contributes significantly to the improvement of welfare in African countries. This positive impact also holds for the sub-sample of Sub-Saharan African (SSA) countries. The results are robust across the fixed effects and IV estimations when variables that affect welfare are controlled for. The findings suggest that China’s claim of a “win-win” aim for its rising investment in African countries may hold.

China and European Innovation: Corporate Takeovers and their Consequences

ABSTRACTWhile Europe has become the principal venue for new Chinese foreign direct investment, little of it has resulted in new (greenfield) production or research and development facilities. The bulk of this investment has been used to take over European companies, outstripping Chinese acquisitions in North America by 800 per cent. While some takeovers have been of insurance, sports, luxury goods and similar non‐strategic companies, many have been of innovation‐driven firms. This article explores the reasons for the preference — by Chinese state‐ and privately owned companies — for takeovers of this type of European company. Its working hypothesis is that there are correspondences between the continuing weaknesses in China's innovation system and the fact that Chinese companies have been partially shut out of the US and Japan, leading to the focus on cutting‐edge technological acquisitions in Europe. While these correspondences cannot be proven empirically, the article suggests that, given the available evidence and the context in which it arises (particularly the Chinese government's ‘Made in China 2025’ industrial agenda), the balance of presumption must be that these are key dynamics driving China's European acquisitions programme. Amongst its conclusions, the article suggests that Chinese corporate takeovers arguably problematize the future of European innovation and competitiveness and thus the technological robustness of Europe's economic development.

Determinants of Chinese Foreign Direct Investment in Africa

ABSTRACT We investigate the role of institutions in attracting Chinese FDI into Africa. Focusing on market- and resource-seeking motivations, we consider whether the impact of institutions varies by motivation for FDI. Our data relates to 43 African countries over 11 years, and we use the Generalized Method of Moments to show that Chinese MNEs are market-seeking and are attracted by weaker institutions. This negative effect of institutions is especially strong in resource-rich and higher-income countries. Our study also finds that in resource-rich African countries, better infrastructure quality attracts Chinese FDI.

Shareholder use of CSR reports: an accountability perspective

Purpose This paper aims to investigate the extent of shareholder engagement and satisfaction with corporate social responsibility (CSR) reports of a Chinese-owned company compared to an Australian-owned company in the Australian mining industry. The study is motivated by the speed, extent and nature of Chinese foreign direct investment in Australia, the resulting negative social attitudes and the impact on the perceptions of a report’s credibility. Design/methodology/approach The authors conducted a survey of 202 minority shareholders of two Australian mining companies, one has a Chinese majority shareholder and the other an Australian majority shareholder. The responses highlight users’ comparative perceptions of corporate motivations for reporting, the level of perceived shareholder power over reporting decisions and the resulting propensity to read CSR reports. Findings The authors found that, contrary to decision-usefulness theory, which posits that users will read CSR reports only if they are deemed to be reliable, that perceptions of poor credibility and poor CSR performance actually result in a higher propensity to read the reports. This suggests that the minority shareholders of the Chinese acquired firm are using reports to monitor the level of corporate accountability. Originality/value The findings have implications for firms operating in politically or socially sensitive industries that are likely to use CSR reporting as a legitimising strategy. The paper also provides guidance to regulators in the provision of information, which is meaningful to minority shareholders.

‘Many Chinas?’ Provincial internationalization and Chinese foreign direct investment in Africa

ABSTRACT Chinese provincial firms are a major and growing source of foreign direct investment (FDI) in Africa, yet there has thus far been little systematic analysis of their motives and behaviour. Based on statistical analysis of a panel of mainland China’s 31 provinces from 2000 to 2015 and a study of three diverse provincial cases, and modifying the classic Organization-Location-Internalization theory of FDI, this article uncovers a three-stage ‘inverted-U’ shaped pathway linking home province internationalization and investment in Africa. Firms from provinces with very low levels of integration in the global economy lack the experience needed to invest in Africa, while those in highly globalized provinces face fewer push factors driving them to (comparatively risky) countries of the developing world. These findings suggest that Chinese provincial FDI in Africa may be driven by a ‘logic of escapism’ alongside conventional FDI motives.

Chinese Power and the State-Owned Enterprise

AbstractChina has become a leading source of outward foreign direct investment (FDI), and the Chinese state exercises a unique degree of influence over its firms. We explore the patterns of political influence over FDI using a comprehensive firm-level data set on Chinese outward FDI from 2000 to 2013. Using six country-level measures of affinity for China, we find that state-owned and globally diversified firms appear to conform most closely to official guidance. Official investment directives and state visits link investments to state policies; Taiwan recognition and Dalai Lama meetings anchor our political interpretations; and UN General Assembly voting and temporary UN Security Council membership suggest that this intervention may be systematic. The results are robust to country, year, and sector fixed effects, and most do not hold for private or small firms. The results suggest that China uses FDI by prominent state-owned enterprises as an instrument to promote its foreign policy.

Why do the Chinese make direct investment in the Europe? Insights from disaggregated bilateral data

This study explores the economic factors of foreign direct investment (FDI) from China to Europe. By drawing data over 8 years and dataset from the International Monetary Fund (IMF) and World Bank (WB), we found that Chinese FDI outflows to Europe are driven by the recipient country's fundamentals (trade openness, resource, institutional quality, and economic growth). These findings confirm the current literature while asserting counterintuitive facts. One of many points is that China is less likely to seek out the investment channel in the large economic status. More importantly, this study differs from extant literature by using the disaggregated panel data of bilateral FDI and trade openness. Therefore, our results would draw policy implications in terms of international finance.

Inclusive growth in Africa: are Chinese investment and local industry participation compatible?

PurposeThis paper aims to explore whether increasing Chinese foreign direct investment (FDI) is associated with rising contributions of local industry in African countries connected to the Belt and Road Initiative (BRI). The existence of cooperative industry linkages between Chinese investments and local businesses is a necessary condition for achieving the mutual benefits asserted by the BRI.Design/methodology/approachUnder growing FDI, the authors framed increasing local industry contribution as indicative of existing industry linkages. Using principal component analysis and multiple regression on collated country-level data, the authors examined relationships between key industry output variables and several independent variables representing Chinese investment and economic activity in a contiguous three-country region, over two investment periods.FindingsIncreasing Chinese FDI was associated with positive economic outcomes including decreasing unemployment; however, it did not appear to support local industry participation. The authors identified a “China effect” that hampered industry contribution to gross domestic product. The authors found that attempting to counterbalance this effect through direct exports to China was not strategically sound. Similarly, export-focused clusters in special zones may not foster industry linkages if they result in isolationism. Rather, host countries have an opportunity to enhance local industry contribution through leveraging interconnectivity factors under increasing FDI.Research limitations/implicationsSmall sample size of the study has implications for the predictive power of the model and for the complete explanation all the emerging findings. However, the authors presented compelling arguments for selecting the specific three countries. By conducting robustness checks on a separate region, findings of this study were substantially corroborated.Practical implicationsInstead of exporting directly to China as a way to mitigate local industry contraction, host countries need to thoughtfully pursue opportunities that present the greatest value-added export advantages. Proposed Chinese-funded infrastructure projects must be negotiated with a goal to strategically reduce interconnectivity barriers and achieve broader logistics improvements in the host countries.Social implicationsThe study provides a tool for proponents of local industry growth to present clearer frameworks in their advocacy. The social tensions around Chinese dominance in the host countries can be reduced by understanding and pursuing levers that enhance industry contribution in those contexts.Originality/valueThis study takes a different approach to examining the professed win-win proposition of the BRI in Africa. It uncovers important effects of increasing Chinese FDI and addresses viable host country responses, including a clear pathway for forging the cooperative industry linkages needed for inclusive growth and sustainable development.

One country, many industries: Heterogeneity of Chinese OFDI motivations at meso level

Research on the stimulants for Chinese Foreign Direct Investment (FDI) is extensive. However most analysis incorporates theoretical models based on the Institution-Based View or, to a lesser extent, the Resource-Based View (RBV). These highlight the importance of the macro (country) and micro (firm) level, while largely ignoring the meso (industry) level. In addition, although investments are known to have several different motivations, stimulated by quite different factors, analysis tends to focus on aggregate FDI flows. We contribute to the literature by proposing an ‘industry-based view’ of FDI which takes account of heterogeneity across industries and FDI motivation. We apply this framework to Chinese OFDI in Europe, differentiating both in terms of investment motivations and sectoral characteristics at (meso) industry level and at (micro) firm level, in home and host countries. Using logistic and multinomial logistic models, our analysis confirms that different types of Chinese FDI (in terms of motivation) are stimulated by different industry-level characteristics in both home and host countries.

Behind the screen: Understanding national support for a foreign investment screening mechanism in the European Union

What determines national preferences for institutionalizing foreign direct investment (FDI) screening? Over the past decade, advanced economies worldwide have tightened their national investment screening mechanisms (ISMs). In March 2019, the European Union (EU) adopted its first common FDI screening framework. This article explores variations in Member State preferences for the creation and nature of a pan-European screening framework. Based on extensive interviews with high-level EU and country officials involved in the negotiation process, and using a unique measure of national support for the EU-wide ISM created through the first-ever elite survey on this subject matter, we find that countries with higher technological levels were more supportive of FDI screening due to concerns over unreciprocated technological transfer. We also show the effects of Chinese FDI on country-level support for FDI screening sector-dependent. We found no evidence that total Chinese FDI predicts preferences for ISM. Instead, countries with high levels of Chinese FDI in strategic sectors are more likely to support the ISM, while those with high levels of Chinese investment in low-tech sectors tend to oppose screening. Our overall findings suggest that EU investment screening, and national-level screening in general, might become more restrictive in the future, especially in light of the COVID-19 pandemic.Supplementary informationThe online version contains supplementary material available at 10.1007/s11558-021-09436-y.

Estimating the ex‐ante and the ex‐post effects of Chinese outward FDI

AbstractThis study investigates the relationship between outward Foreign Direct Investment (FDI) and the performance of Chinese enterprises. Using firm‐level panel data over the period 2008–2014, we introduce a taxonomy of outward FDI that accounts for the decision to invest abroad and the location of foreign affiliates. Through different specifications, we show systematic differences in performance between FDI starters and non‐starters two years before and two years after the first investment by the starters. This fact points to the existence of strong ex‐ante and ex‐post effects of Chinese outward FDI. On one hand, we provide evidence – so far not present in the literature – that the best performing Chinese firms self‐select into outward FDI. On the other hand, controlling for endogeneity through propensity score matching (PSM) techniques, we detect significant learning effects from outward FDI to firm‐level performance. Interestingly, these effects are heterogeneous with respect to destination, with deeper learning for Chinese enterprises investing in Asia.

Determinants and effects of Chinese foreign direct investment in the economy of Ukraine

The article analyzes Chinese foreign direct investment in the economy of Ukraine at the present stage. China is as an important partner for Ukraine, not only in the field of foreign trade and investment but also for the implementation of the strategic vector of Ukraine’s economic development and its integration into the modern world economy.
 The empirical study shows that Chinese investors receive additional incentives to invest in Ukraine if there is a prior positive investment experience, increasing market potential and openness, and economic freedom. As Ukraine is generally perceived as a path to European markets, the signing of the Association Agreement with the EU is a positive factor. However, Chinese investors’ readiness to support corruption schemes in the Ukrainian economy arouses concern. Therefore, in order to enhance and improve the structure of investment flows from China, it is necessary to take a number of measures to overcome corruption.

‘Africa’s China’: Chinese manufacturing investment in Nigeria and channels for technology transfer

ABSTRACT Nigeria has been one of the primary destinations for Chinese foreign direct investment (FDI) in Africa, with emerging clusters in manufacturing sectors. FDI holds potential for technology transfer processes that can foster wider industrialization and structural transformation, but this depends on the development of local linkages that can foster positive spillovers. Through fieldwork and structured survey methods, this paper examines drivers of Chinese outward investment in Nigeria, particularly from 2014 to 2017, highlighting linkages and mechanisms of technology transfer that may catalyze transformation processes and taking a critical view of their potential. I find that, while cases of technology and skills transfer exist, investing firms face challenges of poor infrastructure, lack of skills, and low social trust, which hinder the development of linkages and industrial supply chains. In the wake of the 2014 economic recession, firms cited political and exchange rate instability as challenging; however, greater localization and building local linkages make firms better prepared to weather such challenges.

CHINA`S ECONOMIC INTEREST IN KENYA

This article focuses on China`s economic interest in Africa: Case Study of Kenya. Basically the article will be examining several specific objectives: composition and sectors of Chinese Foreign Direct investments in Kenya particularly in the sphere of infrastructure and telecommunication, the significance and volume of trade imbalance, the economic and social impact of Chinese investments in Kenya and the possible recommendations towards the improvement of social, political and economic development in Kenya. The case study research raises several research questions. What are the economic and social impact of Chinese investments in Kenya? What could be done to improve social, political and economic development in Kenya? In which way should Kenya restructure its policy towards China?