Chinese Outward Foreign Direct Investment Research Articles

Assessing the Impact of COFDI on Economic Growth in African Belt and Road Initiative Countries: An Empirical Two-step System GMM and DID Analysis

This study examines the impact of Chinese outward foreign direct investment (COFDI) on economic and industrial growth across 35 African Belt and Road Initiative (BRI) economies from 2005 to 2020, utilizing panel data and econometric methods such as a two-step system generalized method of moments (SGMM) and difference-in-differences (DID). The findings confirm that COFDI stock positively influences economic and industrial growth, although its impact varies significantly across regions. A comparative analysis of pre- and post-BRI periods highlights the initiative’s role in enhancing COFDI’s effectiveness, reinforcing its contribution to Africa’s development. Subregional analysis further reveals diverse effects, emphasizing the need for tailored policy approaches. The study underscores COFDI’s crucial role in Africa’s economic transformation, demonstrating that BRI participation amplifies its benefits. Given the complexity of these impacts, region-specific policies are essential to maximize the advantages of foreign investments and ensure sustainable economic and industrial growth. JEL Classification F21, O55, F63, O40

Trying to Please Multiplayer Bosses: How the Subsidiaries of Chinese Multinationals Sell OFDI Initiatives to Their Headquarters

Abstract How do subsidiaries sell initiatives to their headquarters? Multilayer decision-makers at corporate headquarters, with divergent interests and power, can overly complicate the acceptance process. We present a multi-case study to explore how subsidiaries of a Chinese multinational enterprise convince top management teams and department heads at their corporate headquarters to engage in foreign investments. Building on a micropolitical perspective, we develop a process model of subsidiary micropolitical strategy adoption consisting of (a) political tension retrieval regarding divergent interests and power at corporate headquarters around specific initiatives, (b) selective coalition building whose interests and power are aligned with the initiatives, and (c) a transitive relation leveraging strategy based on the ties of allied headquarters' managers. We further reveal the interplay between corporate motivations (i.e., market seeking vs. strategic asset seeking) and specific micropolitical activities adopted by subsidiary managers. We enhance the understanding of micropolitics in subsidiary initiatives by underscoring how to strategically manage differences among multilayer actors at corporate headquarters. Additionally, we reveal a political view of foreign investment decision-making in addition to rationality.

Host government digitalization and Chinese OFDI entry mode choice: green-field investment vs cross-border M&A

Based on a theoretical framework based on the perspectives of open governance, transparent governance, and smart governance, the article comprehensively explains the potential impact of host country government digitalization on Chinese enterprises’ OFDI entry mode selection. The results indicate that host government digitalization significantly promotes the probability of Chinese enterprises investing by greenfield investment mode; After using instrumental variable to eliminate endogenous interference and undergoing a series of robustness checks, this conclusion remains robust; Host government digitalization influences the OFDI mode choices of Chinese enterprises by suppressing corruption and strengthening intellectual property protection. Based on the research conclusions, we put forward policy suggestions on “how Chinese enterprises should make OFDI entry mode decision and optimize the project management after entry based on the level of host government digitalization“. First published online 02 April 2025

Diplomatic Engagement and Economic Influence: The Interplay of Chinese OFDI and High-Level Visits

Diplomatic Engagement and Economic Influence: The Interplay of Chinese OFDI and High-Level Visits

An Empirical Study on The Impact of Host Countries’ Environmental Regulations on Chinese OFDI

With the widespread adoption of green and low-carbon development concepts globally, economic growth has also been imbued with more elements of green development. Thus, the environment protection factors take more and more important role in the evaluation system of foreign investments all around the world, which raise the question of whether and how the escalating environmental regulations of host countries can affect Outward FDI (OFDI). Using a uniquely merged dataset of Chinese firm-level OFDI and country-level environmental regulations data over the sample period 2009–2019, this paper investigates the impact of host countries’ environmental regulations on Chinese OFDI from both host countries’ and multinational enterprises’ perspectives, and adds evidence from developing countries with weaker regulations to the 'pollution haven theory'.The conclusions show that Chinese multinational corporations are easily attracted by lax environmental regulations in alternative countries when choosing overseas locations, while strict environmental regulations in host countries reduce the investment probability of Chinese multinational corporations . Overall, the 'pollution haven effect' exists in the process of Chinese enterprises' overseas investment location choice, and several robustness checks confirm our findings. Heterogeneous tests indicate that non-OECD countries are more likely to become pollution havens than OECD countries who have more stringent environmental regulations. Mechanism analysis indicates that the natural resource rent of each country could moderate the impact of host countries’ environmental regulations on Chinese OFDI. Implications for both policy and managerial decision-making are also discussed.

Can diplomatic activities promote foreign direct investment? Empirical evidence from China

PurposeThis study investigates the impact of Chinese senior leaders’ diplomatic visits on outward and inward foreign direct investment (OFDI and IFDI, respectively). Additionally, it aims to discern the differential impacts of diplomatic visits on FDI across different Chinese administrations.Design/methodology/approachWe utilize data about the diplomatic visits of Chinese senior leaders to 146 host countries. The dataset was divided into two leadership eras: the tenure of President Hu Jintao and Prime Minister Wen Jiabao from 2003 to 2012 and the period from 2013 to 2021 under President Xi Jinping and Prime Minister Li Keqiang. We employ generalized least squares, lagged effect, and two-stage least squares methods to estimate the econometric model. This analytical framework assesses the influence of high-level diplomatic visits on FDI flows, addressing potential time-serial and endogeneity concerns.FindingsThe findings reveal that senior leaders’ diplomatic visits significantly boost Chinese OFDI. The effect on IFDI in China is not statistically significant. The administrations of Hu and Xi played positive roles in promoting OFDI. However, only Hu’s administration showed a statistically significant positive relationship with IFDI. The result suggests a potential increase in IFDI between China and host countries within two to three years following diplomatic visits.Originality/valueThis study contributes to the understanding of how Chinese senior leaders’ diplomatic activities affect foreign direct investment. It provides a deeper understanding of Chinese senior leaders’ diplomatic efforts to compensate for investment across two administration periods. It offers insights into the potential influence of diplomatic efforts on FDI, enriching the understanding of diplomacy’s role in international business contexts.

Managing Outward Foreign Direct Investment Risks of Real Estate Projects by Chinese Developers in Malaysia

China's outward foreign direct investment (OFDI) has rapidly expanded in the past decade, driven by policies like the "Go Global" and "One Belt, One Road" initiatives. By 2018, China had invested in over 43,000 foreign enterprises across 188 countries, spanning various sectors, including real estate (Chang et al., 2021). Although late to the global real estate market compared to Western countries, Chinese investment has grown significantly since 2008, reaching $183 billion by 2016 and making China the second-largest global investor in real estate after the United States. (Zhang et al., 2019). Malaysia, particularly the Iskandar Malaysia Special Economic Zone, has attracted significant Chinese real estate investment. By 2013, China had surpassed Singapore as the largest foreign real estate investor in Malaysia, with Chinese investors solidifying their position by 2016 (Avery & Moser, 2023). However, this rapid expansion has brought significant challenges. Chinese developers face numerous risks, including geopolitical uncertainties, economic volatility, and socio-cultural conflicts, especially in regions linked to the Belt and Road Initiative (Li, 2022). Despite the importance of risk management in such a complex environment, many Chinese developers lack a systematic approach. Issues like inadequate risk assessment, overreliance on single risk management tools, and insufficiently trained personnel have led to ineffective mitigation strategies and reduced project profitability (Zhai et al., 2018). These shortcomings highlight a significant gap in both practice and academic literature regarding the effective management of risks in Chinese OFDI real estate projects. Keywords: OFDI, Risk Management, Real Estate Investments, Chinese Developers, Malaysia.

ESG and Chinese corporate OFDI

ESG and Chinese corporate OFDI

Rethinking a Positive-Sum Game: Chinese OFDI and US MNEs’ FDI Location Decisios

Rethinking a Positive-Sum Game: Chinese OFDI and US MNEs’ FDI Location Decisios

Effect of Chinese outward FDI on youth unemployment in sub-Saharan Africa.

This paper investigates the effect of Chinese outward foreign direct investment (FDI) on youth unemployment in sub-Saharan Africa (SSA) by using a modified labour demand model to identify the investment sources that are helpful for reducing youth unemployment in the region. The model is applied to a panel of 42 countries for the period 2003-2021 using random-effect, and generalized method of moment (GMM) estimators for robustness check. Our results suggest that Chinese FDI has direct short-term reducing effect on youth unemployment in SSA. The direction of China's capital investment to infrastructure development and other labour-intensive activities leads to immediate reduction in youth unemployment. However, overtime, due to absence of linkages with domestic firms, and thus lack of demand effects, Chinese FDI becomes insignificant for employment creation. Our results also indicate that Other FDI does not lead to significant reduction in youth unemployment both currently and overtime. Our analysis gives partial support to the argument that the impact of Chinese FDI may differ from those of developed countries. Finally, we could not find evidence that the effect of FDI on employment depends on host country human capital and institutional quality. Several specifications of the empirical model are tested, and explanations are provided for the results. Policy implications are highlighted, especially the need to attract more job absorbing FDI and improve domestic absorptive capacity.

The impact factors of China’s outward foreign direct investment in Singapore

The sudden outbreak of COVID-19 pandemic led to a global recession, but China's OFDI remained on a steady rise, attracting global attention. By the end of 2020, Singapore was the second most developed country after the US in terms of receiving outward foreign direct investment (OFDI) flows from China. The investment cooperation between China and Singapore played an important role in promoting the high-quality development of the Belt and Road Initiative and enhancing the economic cooperation between China and ASEAN after the COVID-19 pandemic. This study delves into the influencing factors of Chinese OFDI to Singapore: home country institutions, host country institutions, and investment motives. This study takes Singapore as the research object and uses the data of China’s OFDI to Singapore from 2001 to 2020 to conduct an empirical analysis through a modified regression model to analyze the development of China’s OFDI to Singapore, so as to make contributions to: (1) providing empirical evidence for studying OFDI from developing to developed countries; (2) providing reference for investment cooperation in the post COVID period between China and Singapore.

A COP28 Perspective: Does Chinese Investment and Fintech Help to Achieve the SDGs of African Economies?

Scientific consensus affirms human activity, particularly carbon emissions from market participants, drives global warming. Foreign investment, crucial for sustainability in developing nations, now faces scrutiny regarding its impact on environmental quality in emerging economies. This study examines the influence of Chinese Outward Foreign Direct Investment (OFDI) and fintech on environmental conditions in the top five Chinese-invested African economies, alongside factors such as energy consumption, economic performance, and unemployment affecting CO2 pollution. Quarterly data from 2006–2021 confirm cointegration among variables via panel unit root and cointegration tests. Panel ARDL method estimates coefficients for short and long-run effects. Our findings reveal: (1) A 1% increase in Chinese investment leads to a 0.56% decrease in CO2 emissions, supporting its positive environmental impact. (2) Fintech adoption also demonstrates a beneficial effect, with a 1% increase associated with a 0.18% reduction in CO2 levels. (3) Total energy consumption, as expected, has a detrimental impact, causing a 0.92% increase in CO2 emissions with a 1% rise. (4) Interestingly, economic growth fosters environmental sustainability, while unemployment correlates negatively with it. These findings suggest that targeted Chinese investments and fintech adoption can aid in mitigating CO2 pollution in African economies while balancing economic considerations.

Evaluation of Chinese OFDI on Local Industrial Structure: A Case Study based on Countries along the “One Belt and One Road”

With the “One Belt and One Road Initiative” (BRI) initially launched in 2013, Chinese outward foreign direct investment (OFDI) has obtained a further growth, which has had an unavoidable effect on the local economic activities of recipient countries. In order to weigh the potential and long-term impact of Chinese OFDI on local economy, this paper determines to test the correlation between Chinese OFDI and changes on local industrial structure via establishing a series of indicator. Relying on the data from countries along BRI from 2013 to 2021, the paper obtain two conclusions: (1) Chinese OFDI affects and improve the industrial efficiency of countries along BRI. (2) There are not obvious evidences on the correlation between Chinese OFDI and the proportion of different industries and the rationalization of local industrial structure, which needs a extensive study.

Determining the environmental effect of Chinese FDI on the Belt and Road countries CO2 emissions: an EKC-based assessment in the context of pollution haven and halo hypotheses

This work aims to examines the effect of Chinese outward foreign direct investment (CoFDI), renewable energy, and energy intensity on CO2 emissions in 46 Belt and Road Initiative (BRI) nations divided into: Panel A, consisting of 16 European countries, and Panel B, comprising 30 Asian and MENA countries. This analysis used data from 2005 to 2018, applying second-generation econometric techniques. The empirical outcomes, obtained using Driscoll–Kraay methods, confirmed the pollution halo effect in Panel A, suggesting that FDI flows in these countries are environmentally friendly. In contrast, the results indicated a positive impact of CoFDI on CO2e in Panel B, supporting the pollution haven hypothesis that FDI may add to pollution. In addition, the study found an inverted-U-shaped association between per capita income and CO2e, validating the environmental Kuznets curve (EKC) hypothesis in both panels. The findings also revealed that energy intensity positively affects CO2e, whereas renewable energy has a significant negative effect in both panels, while the interaction terms of renewable and energy intensity are heterogenous in both panels. Based on these findings, the study recommends policy makers of these countries to attract clean FDI, particularly in renewable sectors, and shift from fossil fuel-based energy to renewable sources to control pollution by enacting energy-saving initiatives via lowering energy intensity.

Hegemon or South-South partner? The ambiguity of Chinese foreign direct investment in Peru

PurposeThe purpose of this paper is to propose a framework for evaluating the relationship between China and Peru, drawing on dependency theory, against the backdrop of China’s explicit policies towards foreign direct investment. It seeks to transcend traditional interpretations of this relationship in the literature that focuses on China as either hegemon or a South–South partner to Latin American countries to highlight a more nuanced relationship.Design/methodology/approachThe paper adopts a case study approach, focusing on China in Peru. The authors examine three areas of traditional, strategic and emerging industries drawing from Chinese national policies, reviewing these against characteristics of dependency: control of production, heterogeneity of actors, transfer of knowledge and delinking.FindingsThe authors find that Chinese foreign direct investment (FDI) in Peru demonstrates mixed motives and collectively operates as an ambiguous player. Chinese firms appear to be willing to work with various actors, but this engagement does not translate into a decolonial development alternative in the absence of a Peruvian political will to delink and Chinese willingness to actively transfer control of production and knowledge.Originality/valueThis paper contributes to existing literature on China in Latin America by evaluating Chinese outward FDI in Peru against China’s strategic aims in terms of a re-evaluation of dependency theory.

A Comparative Study on the Influencing Factors of Sino-US Trade Transactions from a Longitudinal Perspective Based on Principal Component Analysis

The restructuring of relations between the two global powers, China and the US, is one of the dominant elements in today's dynamic world. However, in recent years, with the intensification of mutual strategic contradictions, the restructuring of Sino-US economic and trade relations has increasingly become a consensus among all parties. In view of this, this thesis divides the Sino-US trade friction into three stages from 2002 to 2017, from 2018 to 2020 and from 2021 to 2023, and proposes a research model based on the influence factors of China-US trade exchanges based on the principal component analysis under each timeframe. Firstly, 17 tertiary indicators are selected as the influencing factors of China-US trade exchanges, and secondly, the Pearson's coefficient correlation is utilized to screen the indicators. Next, by using principal component analysis, multiple influencing factors were downscaled into 1 and 2 principal components. GDP per capita, the exchange rate of the RMB to the US dollar, the amount of Chinese OFDI in the US, and the US import/export surplus (deficit) in trade with China are identified as the crucial factors affecting the US-China trade exchange in the three time periods.

Evaluating the impact of OFDI on the growth quality of industrial firms: A dual-perspective analysis from China

Evaluating the impact of OFDI on the growth quality of industrial firms: A dual-perspective analysis from China

Foreign Ownership and State-Owned Enterprises’ Innovation: The Mediating Role of Host Country’s Innovation Level and the Moderating Effect of Government Innovation Subsidies

From the perspectives of ownership dispersion degree after the entry of foreign shareholder and the foreign ownership participation level, respectively, this paper takes Chinese hybrid OFDI state-owned listed industrial companies from 2007 to 2019 as samples, using 3799 observations, to study the impact of foreign ownership on the innovation of OFDI SOEs. We find that compared to the ownership dispersion degree after the entry of foreign shareholder, the foreign ownership participation level plays a more active role in the innovation of OFDI SOE. This positive effect is stronger for non-state-holding enterprises and high-pollution industries. Further analysis reveals that the relationship between foreign ownership and the innovation of SOE is mediated and moderated by the host country’s innovation level and government innovation subsidies, respectively. In addition, in comparison with the ownership dispersion degree after the entry of foreign shareholders, the mediating effect of the host country’s innovation level and the moderating effects of government innovation subsidies are significantly enhanced by the foreign ownership participation level. These findings can promote the study of the relationship between mixed-ownership reform and the innovation of Chinese OFDI SOEs. By verifying the impact of foreign ownership on the effectiveness of OFDI SOE innovation, this paper provides a new perspective on the study of mixed-ownership reform. This paper aims to expand the research field on the relationship between mixed-ownership reform and OFDI SOE innovation, providing theoretical implications and facilitating the policy design of promoting SOE reverse technology spillovers through their governance structural reform.

Sister‐city Ties and Chinese Outward Foreign Direct Investment: A Spatial Econometric Analysis

AbstractThis paper employs dynamic spatial econometric methods to analyze the impact of the sister‐city relationship on Chinese outward foreign direct investment (OFDI) using a linked country‐level dataset from 2003 to 2016. The results show strong and robust evidence that the sister‐city relationship has been a crucial OFDI location determinant in host countries and their neighbors. Specifically, the sister‐city tie between China and the host country has stimulated Chinese OFDI in host countries. Moreover, Chinese OFDI in host countries would be reduced if China concluded sister‐city ties with their neighbors to which we refer as the neighboring effect. Further mechanism tests show that sister cities have promoted OFDI in host countries via four channels: reducing political risk, decreasing information asymmetry, narrowing institutional distance, and mitigating cultural differences. This tendency for sister‐city links to promote OFDI has varied substantially depending on OFDI entry modes (i.e., greenfield or cross‐border mergers and acquisitions), motivation (i.e., resource‐, market‐, technology‐, or efficiency‐oriented OFDI), and Sino–foreign geographical relationships (i.e., Belt and Road Initiative countries or other countries).

Study on Economic Risks of Chinese Outward Foreign Direct Investment in Countries along the “Belt and Road”

Study on Economic Risks of Chinese Outward Foreign Direct Investment in Countries along the “Belt and Road”