Overseas Foreign Direct Investment Research Articles

The Effects of US Sanctions on Chinese Public and Private Overseas Foreign Direct Investment

The Effects of US Sanctions on Chinese Public and Private Overseas Foreign Direct Investment

Chinese Overseas Foreign Direct Investment and Online Digital Freedom in Developing Countries

Although studies have shown China’s growing influence on developing countries’ policies, little empirical work has considered the relationship between Chinese overseas foreign direct investment (FDI) and host countries’ online digital freedom. Considering as many as 112 developing countries from 2003 to 2019, and using a two-stage least squares selection modeling approach, we find an association between Chinese FDI and four types of limits on online digital freedom. Conversely, when we substitute global FDI (excluding Chinese FDI), we obtain different results, suggesting there is something unique about Chinese multinational corporations and online digital freedom. Our research indicates that China and host states’ domestic leaders mutually benefit by restricting online digital freedom.

Foreign trade, foreign direct investment, and urban inequality: The effects of China

ABSTRACT The concentration of population and socioeconomic activities in large cities in developing countries has sparked broad concerns regarding inequality in national urban systems (NUS). This paper examines how Chinese foreign trade and overseas foreign direct investment (OFDI) affected host countries’ NUS from 2000 to 2018. Chinese foreign trade reduced NUS inequality, particularly countries with more cultural distance from China, while OFDI increased NUS inequality only in mineral-rich countries. For Asian Belt and Road countries (BRCs), Chinese foreign trade reduced NUS inequality, especially those with greater institutional distance to China and more government intervention. Chinese OFDI plays the opposite effect, notably for high government intervention countries. Globally, roles of foreign trade and OFDI change with resource endowments and cultural distance, while for Asian BRCs, these roles change with institutional distance and government intervention. This paper bridges gaps in the effects of Chinese foreign trade and OFDI on NUS inequality.

Correction: Chinese Overseas Foreign Direct Investment–International Foreign Portfolio Investment–Financial Sector Development Nexus in the Belt and Road Initiative Economies: A Regional Analysis Based on Third-Generation Techniques

Correction: Chinese Overseas Foreign Direct Investment–International Foreign Portfolio Investment–Financial Sector Development Nexus in the Belt and Road Initiative Economies: A Regional Analysis Based on Third-Generation Techniques

Chinese Overseas Foreign Direct Investment–International Foreign Portfolio Investment–Financial Sector Development Nexus in the Belt and Road Initiative Economies: A Regional Analysis Based on Third-Generation Techniques

Chinese Overseas Foreign Direct Investment–International Foreign Portfolio Investment–Financial Sector Development Nexus in the Belt and Road Initiative Economies: A Regional Analysis Based on Third-Generation Techniques

Domestic Political Unrest and Chinese Overseas Foreign Direct Investment

Domestic Political Unrest and Chinese Overseas Foreign Direct Investment

What motivates Chinese multinational firms to invest in Asia? Poor institutions versus rich infrastructures of a host country

What explains the phenomenal rise in China's outward foreign direct investment to the regional economies of Southeast and East Asia? In order to answer the question, we examine the relative efficacy of two contrasting approaches for explaining the upsurge in outward foreign direct investment – namely, the place-based approach of economic geography vis-à-vis the pollution haven hypothesis. We use China's outward foreign direct investment in a sample of 12 Southeast and East Asian countries, over the period 2003–2018, to arrive at the following results. First, as suggested by economic geography, regional infrastructures - such as mobile phone telecommunication, fixed broadband, and electricity infrastructure - played a crucial role in encouraging Chinese multinational firms to invest in Asian countries, while telephone telecommunication had a quadratic effect. Secondly, institutions' effects are complex. For instance, political stability in host countries promoted China's outward foreign direct investment in the Asian region before 2009 became a deterrent in the post-2009 era, while other indicators of quality of institutions (e.g., voice and accountability and regulatory quality) acted as barriers for the Chinese overseas foreign direct investment (OFDI) throughout the whole period. Thirdly, we find that the pollution haven hypothesis is untenable for the chosen countries. Fourthly, a significant pull factor for the Chinese OFDI is environmental quality of host countries.

A study on agricultural investment along the Belt and Road

On the basis of the theories of overseas foreign direct investment (OFDI) and New Economic Geography, the factors influencing the grain industry investment in the countries along the Belt and Road (herein after referred to as the “B&R countries”) were discussed, and the impacts of such investment in terms of the bilateral economic distance, institutional environments and the farmland resource levels of host countries were analyzed in depth in this study, thus expanding the theoretical analysis framework of OFDI. Empirically, the dependence on China's overseas investment was applied to measure the bilateral economic distance, and these two variables were incorporated into the empirical model along with the location characteristics of the institutional environments of host countries. The Zero-inflated Poisson Model was applied to analyze China and the B&R countries. A conclusion derived is as follows: the farmland resources of the B&R countries have a positive impact on China's overseas farmland investment, and the location characteristics of the B&R countries vary greatly. China should confer great importance to regional comparative advantages, conduct differentiated cooperation in farmland investment, strengthen the conservation of water and land resources and safeguard of farmers' livelihoods in the less developed regions, and guarantee the grain security in developing countries, while valuing the distribution and sales of agricultural products in developed regions and greatly enhance the ties between enterprises and local markets to ensure the sustainable development of grain industry investment projects in the B&R countries.

Political Risk and Economic Sectors: Chinese Overseas Public and Private Investment in the Developing World

Abstract This article compares Chinese public and private overseas foreign direct investment (FDI) to determine how political risk affects an authoritarian developing country. Using panel data for up to 118 developing countries from 2003 to 2017, and studying different economic investment sectors (i.e., primary, secondary, and tertiary; energy/non-energy), we find that political risk has varying effects on Chinese overseas FDI. Chinese state firms appear to invest in higher political risk countries regardless of the economic sector, while Chinese private firms tend to invest in states who share similar political ideologies when investing in the energy/primary sector. We also find that both public and private Chinese firms choose geographically proximate countries for economically riskier investments. Our sectoral investment study offers insights into differences in Chinese public and private firms’ political risk tolerance.

From focus to ambidexterity: the choice of catch-up strategy for EMNEs

PurposeEmerging-market multinational enterprises (EMNEs) can choose focused or ambidextrous strategies to catch up with global market leaders through overseas foreign direct investment (OFDI). The Belt and Road Initiative (BRI), launched by the Chinese government in 2013, had a profound impact on Chinese multinational enterprises’ international behavior. This paper analyses how EMNEs select focused or ambidextrous catch-up strategies before and after the BRI, integrating ambidexterity and catch-up theories to provide a more nuanced understanding of the evolution of EMNE strategy.Design/methodology/approachA case study is well suited for deriving rich descriptions of empirical phenomena for which little theory exists. Because the existing literature has not yet fully explored and conceptually modeled the influence of windows of opportunity on international catch-up strategies, we use qualitative research to explore the mechanisms of strategy evolution in EMNEs.FindingsThe results show that the choice of catch-up strategy is influenced by the nature of windows of opportunity and the firm's accumulated technological capability. Specifically, the opening of institutional windows as a result of the BRI could give significant momentum to the international catch-up process by providing incentives and opportunities for EMNEs to enter more markets and new technology fields. The EMNEs studied underwent a transition from a focused strategy in the catch-up stage to an ambidextrous strategy in the beyond catch-up stage.Originality/valueThese conclusions can not only deepen our understanding of the dynamics of catch-up strategies in the global context but also enrich the research on the ambidexterity of EMNEs, especially in the context of the BRI.

HOW IS THE “CHINA BRAND” IMPACTING ON GLOBALIZATION? EXAMINING NEW FDI PATTERNS FROM A JAPANESE HISTORICAL PERSPECTIVE

This article is aimed at better understanding China's Overseas Foreign Direct Investment (OFDI) choices through a post-War Japanese historical perspective. It will focus in the main on OFDI as a marker of an advanced stage of the East Asian ‘developmental state’ formula, wherein the ‘China Brand’ takes shape. The transition process from heavy-industry and low-value added goods to frontier-technology manufacturing with global brand recognition will be placed under scrutiny. A Japanese perspective is called for, as much of the theory in the field of international business to do with OFDI and the growth of multinational corporations (MNCs) is currently primarily derived from a Western developed-economy setting, and hence does not seek to offer much in the way of predictive insight about all-important yet middle-income China, as it proceeds towards becoming the largest economy on the planet. The article surveys the historical trajectory of Chinese OFDI, underling its correlation with inbound foreign investment into China; it then offers a comparative view of Japanese OFDI in the pre- and post-War era. It then assesses Chinese brand strength in the electrical appliance, automobile, and IT areas. Finally, it offers a prognosis as to the future direction of Chinese OFDI, and how it might affect the contours of globalization as well as Sino-American rivalries.

China's domestic and foreign influence in the global cobalt supply chain

In addition to increasing interest in the supply risk of minerals produced in China, there is also concern that China's efforts to mitigate its own mineral supply risk—through overseas foreign direct investment—may limit mineral availability for other countries in the short-term (due to production capacity constraints). However, little is publicly known about the quantity of global mineral production that is subject to Chinese ownership influence or how this influence may mitigate China's exposure to mineral commodity supply risk. In this analysis, we estimate China's ownership-share of foreign production for cobalt mine and intermediate materials (in the year 2016), as well as the net import reliance of China's cobalt refinery industry—which is then adjusted to reflect China's ownership share of foreign production. First, we find that China's foreign cobalt ownership is predominantly in the Democratic Republic of the Congo, the largest source of cobalt mine and intermediate imports for China's growing cobalt refinery industry. Second, overseas foreign direct investment provided China with ownership influence over roughly 29% of its cobalt mine and intermediate imports in 2016—which may have reduced the supply risk exposure of China's refinery industry from a net import reliance of 97% (on cobalt mine and intermediate materials) to an adjusted net import reliance of 68%. Third, China's global production share jumps from 2% to 14% (for cobalt mine material) and from 11% to 33% (for cobalt intermediate material) when China's ownership-share of foreign production is added to China's domestic production share. Fourth, over time China's foreign direct investment appears to have targeted facilities with progressively larger cobalt production capacities. Finally, China's global production share increases as cobalt material moves downstream (i.e. mine, 14%; intermediate, 33%; refined, 50% in 2016). If a primary motivation of China's Going Out Strategy is to secure natural resources, then China's global production share may be reserved for Chinese manufacturers. As a result, this analysis indicates that—for countries outside China—concerns related to critical mineral availability and supply risk may not be confined to minerals produced in China.

A Cross-Sectional Analysis of Overseas Foreign Direct Investment in Developed and Developing Countries

A Cross-Sectional Analysis of Overseas Foreign Direct Investment in Developed and Developing Countries

Local employment additionality impacts of Chinese overseas foreign direct investment in selected African economies

Many empirical studies have focused on the macroeconomic impact of Chinese Outward Foreign Direct Investment on African economies. However, the results are rarely consistent and often contradictory. This paper approaches the ‘impact’ question from a different perspective using the ‘net additionality’ methodology to test, at the micro level, if Chinese Outward Foreign Direct Investment does positively impact one dimension, employment, at the local level. The data set comprises 80 Chinese investment projects over the 2003–2013 period in seven African economies. Net additionality, as a concept, is much wider than standard multiplier analysis and is more suited to analysing project impacts at the local level in both developed and developing economies. The results demonstrate that Chinese Outward Foreign Direct Investment can have substantial indirect employment effects and induced employment effects can be significant under certain conditions. These include a local supply chain infrastructure, reasonable human capital levels, availability of locally produced goods and local wages spent on such goods. The policy implications arising from the study suggest a dire need for local government action in the areas of training, education, local content minima and enabling policies that encourage small and medium enterprises' (SME) development.

Chinese Overseas Foreign Direct Investment and the Sino-Serbian Strategic Partnership

While considerable scholarly attention has been devoted to foreign direct investment into China, the emergent status of the People's Republic as an outward investor of growing international significance has, arguably, been subject to neglect. Yet ‘going overseas’ has been a fundamental element in the reform and modernisation of the Chinese economy, this policy having been formally ratified by the Chinese Communist Party in the late 1990s, with China having now ascended to the position of third most important investor abroad, after the USA and Japan. Scrutiny of the particular nature of Chinese overseas foreign direct investment (OFDI) is instructive because it reveals that, while its determinants may be familiar from a Western perspective, peculiarities are also evident, notably an integral involvement of the state in its inception. As the global spread of Chinese OFDI has now extended to Europe, this paper examines the particular case of the Sino-Serbian strategic partnership, a major element of which relates to Chinese assistance in the reconstruction of the Serbian infrastructure. This paper focuses on a Chinese-sponsored construction project on the edge of Europe. It first considers the flows and specific determinants of Chinese OFDI. The geopolitical connotations of China's economic interventions overseas are then highlighted. Finally, it offers an exposition of the Sino-Serbian strategic partnership and the Chinese-sponsored ‘Bridge of Friendship’ currently being constructed over the River Danube near Belgrade. The paper concludes that aspects of Chinese OFDI are powerfully conditioned by underlying geo-political and foreign policy objectives prevalent in the home country as well as economic considerations.

A Window of Opportunity for Israel: Attracting Chinese Overseas Foreign Direct Investment

Over the past decade, Chinese overseas foreign direct investment (OFDI) has risen dramatically around the world, prompting a range of policy responses by other governments ranging from outright opposition to carte-blanche approval. The United States has taken a more conservative tack, imposing difficult regulations and blocking deals on the grounds of national security interests. However, a close analysis of the makeup and sectoral trends of Chinese investment call into question the logic and legitimacy of US misgivings. Given the investment disincentives posed by the US Congress and Chinese firms’ search for alternate investment markets, Israel is in a key position to offer an attractive investment environment as an alternative to the US and the EU in targeted industries. Israel parallels the US as an OFDI destination for its specialized high-tech innovation, highly skilled workforce, and variety of investment and business incentives. Examining the US and EU responses to Chinese investment patterns provides insight into how Israel might best leverage its position to attract Chinese overseas foreign direct investment.

Macroeconomic Prospects for China’s Outward FDI

We present evidence from panel data on overseas foreign direct investment (OFDI) by Chinese firms in 103 countries during 2003-2007. The data suggest that Chinese imports, unlike Chinese exports, stimulate investment in the country of origin. This article supports the theory that Chinese investment abroad is horizontal and designed to serve the Chinese local market (import platform investment). Estimates suggest that a 1% change in imports from China will lead to a 0.15% change in Chinese OFDI. We also find that an appreciation of the Chinese exchange rate will have a strong influence on firm entry decisions.

China's Overseas Investment in the European Union

Chinese overseas investment is a new, and growing phenomenon. In the last decade, there have been exponential increases in how much direct investment is flowing from China, particularly into the resource sector. As the eurozone crisis has deepened since 2008, there has been continuing talk by political and business leaders of investment in Europe being a key target for Chinese companies. And yet, the amounts invested so far come to less than 5 percent of China's global overseas foreign direct investment (FDI) total. In the crucial determinants of Chinese FDI, the EU ranks low. There is therefore a good structural reason why, despite the ambitious talk of the Chinese coming to invest more in vital sectors in the EU, this is not happening at the moment and is not likely to happen until China develops into a middle income, more developed economy.

Mature Export-Led Growth and Gender Wage Inequality in Taiwan

After 1980, the Taiwanese economy was marked by technological change, growing overseas investment by Taiwanese firms, and continuing success with export-oriented manufacturing. In the manufacturing sector these developments coincided with a decline in women's employment opportunities relative to men's, a shift from wage to salaried employment, and an increase in gender wage inequality. Using industry-level panel data, this study investigates the effects of Taiwan's restructuring during this period on gender wage inequality. The most important findings are: greater export orientation adversely affects both men's and women's wages yet reduces gender wage inequality, because male employees face a greater wage penalty than women; greater capital intensity improves both men's and women's wages; and the shift toward salaried jobs improves men's wages while reducing wages of women. These results hold after controlling for the effects of female industrial crowding, female reserve labor supply, firm size, and overseas foreign direct investment.