Chinese Outward Foreign Direct Investment Research Articles

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

Purpose The 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/approach The 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. Findings The 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/value This 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

This study addresses a key question: Does outward foreign direct investment (OFDI) by Chinese firms improve the quality of economic growth? We explore this question using a dataset of over 250,000 industrial firms from 2009 to 2013, employing a propensity score matching method. First, our analysis shows that OFDI broadly enhances the quality of economic growth. However, when control variables are taken into account, their influence on growth efficiency appears to be inhibitory. Second, firms engaged in OFDI have a markedly positive impact on the quality of their economic growth compared to non-OFDI firms. Third, our investigation into firm heterogeneity reveals that OFDI firms that invest in developed countries and focus on trade sales benefit significantly from the quality of their economic growth, regardless of the depth of investment. These insights provide a critical empirical lens for understanding Chinese firms' OFDI strategies and a valuable reference for shaping China's path towards a ‘quality’ economy.

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).

THE IMPACTS OF INSTITUTIONAL DISTANCE ON THE LOCATION OF CHINA’s OUTWARD FOREIGN DIRECT INVESTMENT IN ASEAN: An Empirical Research Based on CAGE Distance Framework

As the world political and economic environment continues to change, the external environment faced by Chinese OFDI enterprises was becoming increasingly complex, with the impacts of institutional distance becoming more prominent.

Sustainable Practices in Global Supply Chains of Chinese Enterprises: Biblometeric Approach

Chinese enterprises have indeed recognized the importance of sustainable practices in their global supply chains, with one key practice being the enhancement of supply chain transparency. These enterprises are implementing measures to trace and track raw materials and components, ensuring compliance with sustainability standards and ethical sourcing practices. This transparency is crucial in identifying and mitigating environmental and social risks within the supply chain. However, it is important to note that there is still a lack of extensive research in the context of China regarding sustainable practices in global supply chains. While some studies and initiatives have been conducted, there is a need for more comprehensive research to understand the specific challenges and opportunities faced by Chinese enterprises in adopting and implementing sustainable practices throughout their supply chains. The objective of this study is investigating the research progress on issue related Sustainable Practices in Global Supply Chains of Chinese Enterprises. In doing so, systematic literature research was implemented on the supply chains of Chinese enterprises' foreign direct investment (FDI) to provides insights into the penetration and significance of sustainable concepts in this topic. This paper utilizes advanced data visualization techniques and an in-depth literature review to comprehensively summarize and review previous research extracted from the Web of Science database. The study included 518 articles and analyzed them through RStudio and VOSviewer software. Research analysis reveals that most of the past research articles on this topic primarily come from China, followed by large economies such as the United States and the United Kingdom. However, when ranked by influence, the order is Canada, the UK, and the US. Around 2020, collaborations between countries mainly occurred in Asian nations. China, enterprises, and FDI are currently the most popular keywords. The importance of sustainability in the research on FDI in Chinese enterprises has been verified through data analysis and theoretical review. Key terms related to sustainability, such as "carbon dioxide emissions, economic growth, and energy consumption", are expected to play a vital role in future research. Current theoretical studies confirm that integrating environmental, social, and economic goals (ESG) into supply chain operations can implement a sustainable philosophy for the entire product lifecycle in Chinese OFDI enterprises. Disseminating sustainable management principles in supply chains among Chinese OFDI companies can contribute to ESG sustainability goals, while also enhancing the long-term profitability of the companies themselves.

Green outward foreign direct investment and host country environmental effects: The home country's carbon emission reduction system is crucial

Studies on the environmental impacts of outward foreign direct investment (OFDI) with less attention paid to the relationship between gradually increasing green investment and carbon emissions in the host countries. Based on the background of global carbon emission reduction, this study constructs a STIRPAT and difference-in-differences model to analyze the environmental effects of China's OFDI in ASEAN countries using unique enterprise-level data of China's OFDI from 2005 to 2020. The results show that the impact of Chinese OFDI on carbon emissions in ASEAN countries varies with the investment sector, the home country's enterprise ownership type, and environmental policy. China's green OFDI shows a clear “Pollution Halo” effect regarding investment sectors. However, the “Pollution Halo” effect of green OFDI by Chinese state-owned enterprises (SOEs) is more pronounced when considering the home country's enterprise ownership type. In addition, from the home country's environmental policy perspective, implementing China's domestic low-carbon pilot policy has a “Pollution Haven” effect on host countries. This study provides policy implications to promote the green transformation of Chinese OFDI and carbon emission reduction in ASEAN countries.

Going Global in the Digital Era

This study investigates the effect of digital finance on Chinese OFDI using Probit and Logit models on A-share-listed Chinese enterprises and representative OFDI data from 2011 to 2020. It shows that digital finance has a heterogeneous impact on Chinese OFDI both in probability and scale depending on the enterprise digitalization level. That is, digital finance has a positive (negative) effect on the OFDI of high (low) digital enterprises. Mechanism analysis reveals that the digital divide, which causes credit resources to be squeezed and increased financing constraints for these enterprises, is the main cause of the negative impact of digital finance on the OFDI of low-digital enterprises while the negative impact of digital finance on the OFDI of low-digital enterprises is limited to greenfield investments and highly competitive industries. The findings highlight the importance of encouraging enterprise digital transformation when developing digital finance policies to effectively leverage the potential of digital finance to drive Chinese firms' OFDI.

The Chinese belt and road initiative: development project with strings attached?

PurposeThis study aims to investigate how the Chinese Belt and Road Initiative (BRI) and Chinese outward foreign direct investments (FDI) impact the Belt and Road countries (BRCs). It draws on postcolonial theory to investigate the (geo)political objectives behind the financial and economic means.Design/methodology/approachIn line with the nature of postcolonial studies, the study applies a discourse analysis integrating it with empirical data on indebtedness and trade.FindingsThis study finds that FDI and the BRI, as a development project, need to be considered a double-edged sword for the receiving countries. The authors provide evidence that China has instrumentalized financial and economic means to gain political influence and pursue geopolitical ambitions. Moreover, investments into sensitive sectors (e.g. energy, infrastructure), combined with the BRCs’ inability to pay back loans, could eventually lead to China gaining control of these assets.Research limitations/implicationsThe study investigates the financial and economic means that are instrumentalized to gain political influence while not considering flows of technology and know-how. It also limits itself to the study of FDI coming from one specific country, i.e. China. Therefore, no comparison and evaluation are made of FDI from other countries, such as the USA or European countries.Practical implicationsBy revealing noncommercial objectives and geopolitical ambitions that China pursues through the BRI, the authors derive policy implications for the BRCs, third countries and China.Originality/valueThe study contributes to postcolonial theory and neocolonialism by investigating how China uses financial and economic means to achieve noncommercial objectives and pursue geopolitical ambitions. Additionally, the authors enhance the understanding of FDI by highlighting more subtle aspects of the complex and contextual nature of FDI as a social phenomenon, which have been overlooked thus far. The authors challenge the predominant positive framing of FDI and provide a counterpoint to the way FDI is often coined.

The impact of China’s financing to Africa on bilateral trade intensity under the Belt and Road Initiative

ABSTRACT Based on panel data from 2000 to 2021 covering African 52 countries under the Belt and Road Initiative (BRI), and utilizing a system generalized method of moments with instrumental variables, the study finds that China’s financing has played a positive role in both export and import intensities of African countries with China. However, the impacts of different financing types on trade intensities vary by different country groups and periods. First, Chinese outward foreign direct investment (OFDI) has a much bigger impact on both export intensity and import intensity, and aid has a much bigger impact on export intensity in resource-rich African countries than other countries. Second, Chinese OFDI has a much bigger impact on export intensity and aid has a much bigger impact on both export and import intensities in low-income African countries than other countries. Third, the regression results from different periods indicate that Chinese financing has enhanced the bidirectional trade relations between China and Africa since BRI launch. The study is conducive to the exploration of multinational corporations and foreign aid’s role in trade relations and will help African countries use Chinese capital to promote bilateral cooperation and get rid of poverty.

Impact of Economic Policy Uncertainty on the Outward Foreign Direct Investment of Chinese Firms

Purpose - This study empirically investigated the effect of Economic Policy Uncertainty (EPU) on the OFDI of Chinese firms. It also explores other factors influencing OFDI, such as market potential, economic openness, firm size, profitability, and the importance of control variables in the analysis. 
 Design/Methodology/Approach - The panel data was established from 2004 to 2020, and a fixed-effects model was adopted for empirical analysis. EPU data was used as the main explanatory variable, and country-level variables such as overseas market potential, per capita GDP, and degree of economic openness, and firm-level variables such as firm size, capital structure, and return on total assets were applied as control variables.
 Findings - The results of regression using a fixed-effects model suggest that rising policy uncertainty in both Chinese and foreign economies reduces Chinese OFDI. OFDI’s decisions were also found to be influenced by a firm’s characteristics. This negative relationship is influenced by capital flow restrictions, financing constraints, and a focus on the home market. Additionally, foreign economic policy uncertainty (FEPU) in target countries also has a negative impact on Chinese firm OFDI, influenced by currency risk, policy restrictions, and risk assessment, making firms more cautious of cross-border investments.
 Research Implications - To promote Chinese firm Outward Foreign Direct Investment (OFDI), the Chinese government needs to provide a stable and predictable policy environment, as economic policy uncertainty negatively affects OFDI. Additionally, the analysis highlights the importance of understanding and mastering foreign market conditions, including financial policies, legal systems, infrastructure, and business environments, before making OFDI decisions.

Research on the Influence of Host Country’s Economic Policy Uncertainty on China’s OFDI

The influence of host county economic policy uncertainty (EPU) on China’s outward foreign direct investment is examined in this article (OFDI). The impact of host country economic policy uncertainty on China’s OFDI is investigated using panel data from Chinese OFDI to 20 important investment countries from 2011 to 2020. A fixed effects model is used, with the host country’s economic policy uncertainty as the main explanatory variable and six significant variables chosen as control variables. According to the results of the empirical analysis, the host country’s economic policy uncertainty will inhibit investment from the home country to that country.

Geopolitical risk and green outward foreign direct investment location choice: evidence from Chinese listed companies.

Green outward foreign direct investment (OFDI) has become an important driving force for sustainable economic and environmental development. However, increasing geopolitical risks (GPR) pose a critical obstacle to the green OFDI of multinational enterprises. Drawing upon international production eclectic theory, we explore the impact of GPR on the green OFDI of Chinese enterprises and discuss the moderating role of firms' green technological and political capabilities including different moderating effects of these types of capabilities in the Belt and Road Initiative (BRI) and non-BRI countries. Using the BvD Cross-border Investment database and annual reports of Chinese A-listed companies, we constructed a unique micro-firm overseas green project dataset in 2013-2020. Negative binomial models were used for empirical testing. The GPR has a significant negative impact on Chinese enterprises' green OFDI location choices. The impact intensity varies with the firms' green technological and political capabilities. In addition, compared with non-BRI countries, the role of firms' green technological capability in BRI countries is stronger, while firms' political capability is not significant. These findings expand research on the relationship between GPR and green development by emphasizing the differential impact of GPR on enterprises' green OFDI location choices under different firm capabilities and bilateral country relations.

Beyond as bridges: The role of the Chinese voluntary associations in Chinese outward foreign direct investment in Southeast Asia

With the implementation of the ‘Go Global’ strategy and the Belt and Road Initiative, Chinese enterprises have gradually grown into the main force of outward foreign direct investment (OFDI) around the world. Overseas and domestic Chinese voluntary associations (CVAs) have actively promoted inward foreign direct investment in China, while their role in helping Chinese enterprises invest abroad has not been fully revealed. To address this lacuna, we explore the role of CVAs in the foreign direct investment of Chinese enterprises in Southeast Asia and the heterogeneity of their roles based on different types of associations. Our main argument is that CVAs play an intermediary role in shaping Chinese OFDI by facilitating bilateral information exchange and resource matching to enable enterprises' global–local interactions. This research contributes to verifying the impact of CVAs on Chinese enterprises' OFDI and providing implications for both host countries to attract investment and multinational enterprises from China and other developing countries to achieve internationalisation.

Drivers of China’s outward foreign direct investment: a comprehensive panel data analysis

PurposeThis paper aims to investigate the primary motivations for China’s outward foreign direct investment (ODI) decisions.Design/methodology/approachUsing a panel data sample covering the period 2003–2012 and a comprehensive set of 176 host countries.FindingsThis study finds that market size, trade variables and natural resource variables are strongly related to the Chinese ODI stocks. This indicates that Chinese ODI decisions are driven by both market- and resource-seeking motives. The subperiod sample test results lend even stronger support to the market-seeking motive for ODI.Originality/valueThese results seem to emerge from the policy changes that were undertaken during the sample period. Consistent with subgroup tests, this study finds that the main purposes of China’s ODI in the top 100 countries are natural resource explorations and production line replacements.