Overseas Investment Research Articles

The impact of OFDI reverse technology spillovers on China's energy intensity: Analysis of provincial panel data

Reducing energy intensity is crucial for maintaining national energy security and achieving a green economic transition. Outer circulation creates good external conditions for improving the home country's energy utilization efficiency. Given this, we pioneer the measurement of reverse technology spillovers (RTS) using the data of the domestic enterprise's overseas investment, innovatively construct an instrumental variable involving money supply fluctuations and the modern history of port opening, and adopt the two-stage least squares (2SLS) method to obtain a consistent estimate of the effect on energy intensity at the provincial level. The main findings show that RTS significantly reduces energy intensity, which remains robust after recalculating the dependent variable and the core explanatory variable, shortening the time window, and reducing the sample size. Furthermore, the decline in energy intensity benefits more from technology spillovers obtained by overseas investment activities in areas along the Belt and Road Initiative (BRI) and technology-intensive and non-resource-intensive industries.

Net Transmitter of Stock Market Volatility and Safe Haven for Portfolio Investors in the Asian Dragons

The return and volatility spillover effects on Asian Dragons were investigated in this study. Yahoo Finance provided the monthly statistics (from August 1997 to December 2020). This study used a generalized autoregressive conditional heteroskedasticity–autoregressive moving average (GARCH–ARMA) model. The results showed that return spillover effects were observed in unidirectional relationships, but volatility spillover effects were shown in both unidirectional and bidirectional connections. The TSEC Weighted Index (TWII) and the Hang Seng Index (HSI) were net stock market return transmitters to other markets, whereas the Straits Times Index (STI) and the Korean Composite Stock Price Indices (KOSPI) were net receivers. Simultaneously, the STI was a significant net transmitter of stock market volatility to other markets, according to research. As a result, the KOSPI has become a safe haven for portfolio investors. Portfolio managers and overseas investors who are reviewing investment and asset allocation decisions should be aware of these facts.

Foreign shareholders, relative foreign policy uncertainty and corporate cash holdings

Studies have shown that foreign investors hedge risks stemming from economic and political uncertainty in the home country through outward investment. This paper studies how foreign investors' home country risk affects their overseas investment and the host country firms' corporate cash holdings. We find that relative foreign EPU, defined as the difference between foreign investors' home country EPU and the host country of investment EPU, negatively impacts the host country firms' cash holdings through their influences on managerial decision-making. This negative relationship arises from firms' precautionary and transaction motives as foreign investors perceive lower corporate risk and better investment opportunities in the host country firms. Good corporate governance is also instrumental in yielding this negative relationship. The reduction in cash holdings due to high relative foreign EPU is more pronounced if foreign investors' home country legal environment is weaker, the two countries are further apart, and there is little trade partnership between them.

The Perfection of Subrogation System in Overseas Investment Insurance System

The Perfection of Subrogation System in Overseas Investment Insurance System

Demanding development: The political economy of climate finance and overseas investments from China

This paper examines the drivers of Chinese overseas financing in renewable energy and the political economy factors in recipient countries that steer this finance towards climate-friendly projects. We examine utility-scale renewable energy projects in Argentina, Bulgaria, Chile, Ecuador, Ethiopia, Kenya, Lesotho, Pakistan, and Romania. Through in-depth interviews with policymakers and relevant stakeholders, we gathered data on the factors that led to Chinese policy bank investment in renewables. We find that where host country governments have offered strong policy incentives for renewables, the Chinese banks and developers readily provided bundled financing, technology, and construction services even in markets considered to be risky. Additional risk mitigation instruments were utilized by the Chinese policy banks in some cases. In five of the nine countries studied, political agreements preceded the investments. Developing countries are found to value the bundled nature of finance, technology, and construction services offered by China as well as the timeliness of construction. As governments move towards policies utilizing competitive price discovery mechanisms, such as reverse auctions where developers compete to submit the lowest bid, the Chinese policy bank appetite for low-carbon investments may wane. Potential future synergies between China's policy banks and other multilateral development banks are explored.

Multiobjective Differential Evolution Clustering Algorithm Based on Multimedia Information in Working Mechanism Innovation for Traditional Chinese Medicine

Aiming at working mechanism innovation for traditional Chinese medicine, a multiobjective differential evolution clustering algorithm based on multimedia information is proposed and applied. In promoting the international development of the traditional Chinese medicine industry, R&D innovation and working mechanism innovation must be paid attention to. This paper takes a specific Chinese medicine company as an example, combined with differential evolution clustering algorithm to effectively help Chinese medicine enterprises choose a more suitable innovation model. This paper starts with specific cases and carries out research from the microperspective of traditional Chinese medicine enterprises. It believes that in the process of international development, traditional Chinese medicine enterprises must base on overseas investment in R&D and innovation, strengthen self-help innovation, further enhance their R&D stamina through working mechanism innovation, gradually open overseas markets, and realize the internationalization of traditional Chinese medicine.

Unveiling China’s Overseas Photovoltaic Power Stations in Pakistan under Low-Carbon Transition

Under the China–Pakistan Economic Corridor, renewable energy projects gradually receive due attention, among which the photovoltaic power stations in Quaid-e-Azam Solar Park represents the most typical power stations in Pakistan. The construction and development processes of the photovoltaic power stations are divided into three stages, with enterprises involved including TBEA Xinjiang Sunoasis Co., Ltd., Urumqi, China and Zonergy Solar Technology Co., Ltd., Zigong, China. The development model of the photovoltaic power stations changed from engineering, procurement, and construction (EPC) plus operation and maintenance (O&M) mode to the Build–Own–Operate (BOO) mode. Through solar power generation and marginal emission factors of photovoltaic power stations, the cumulative electricity generation during the operation period can reach nearly 40.09 billion kWh, and the cumulative emission reduction potential of photovoltaic power stations can reach 23.82 Mt CO2-eq. Based on the multi-stage construction of photovoltaic power stations in the solar park, the land, infrastructure, and transmission facilities could be arranged to simplify the procedures and attract overseas investment. The construction and development model of Quaid-e-Azam Solar Park could provide a reference for the promotion of low-carbon transition, the adjustment of traditional energy structures, the fulfillment of carbon reduction commitments, and the mitigation of climate change, which could provide policy implications for renewable energy development and low-carbon transition in Pakistan.

Effects of Host-Country Corruption on China’s Outward Foreign Direct Investments: Expert Knowledge Versus Public Awareness

Corruption in the host nation is a key issue influencing foreign direct investment. Most existing studies use the expert-knowledge-based corruption index as a proxy for corruption. However, the validity of these published corruption indexes is often questioned by scholars and experts. By introducing Internet data to evaluate public corruption awareness levels, this paper uses two different corruption proxy variables to investigate the relationship between host country corruption and China’s OFDI. In addition, these relationships are further compared between the Belt and Road (B&R) countries and non-B&R countries. The empirical results show that there are negative correlations between host country corruption and China’s OFDI flow for the whole sample, B&R countries and non-B&R countries. The empirical results of this paper serve as a reference for Chinese enterprises to make overseas investment decisions.

Literature Review and Outlook on Geopolitical Risks of Overseas Investment

Literature Review and Outlook on Geopolitical Risks of Overseas Investment

The impact of the institutional environment of the host country on the perception of compliance risk of the international engineering contractor: the moderating effect of absorptive capacity

PurposeWhile there is a general belief that a defective institutional environment will lead to higher compliance risk, the current state of knowledge about how the institutional environment affects enterprises' compliance is equivocal. This study aims to explore how does the host country's institutional environment affect the compliance risk perception of international engineering contractors and how to mitigate this impact.Design/methodology/approachThis study empirically tests the impact of the institutional environment from the two dimensions of the institutional environment: legal completeness reflects whether the formal regulations are clear, detailed and comprehensive and legal effectiveness reflects whether rules and policies can be implemented effectively when the proper legal codes are provided. Based on 213 questionnaire data, this study uses partial least squares structural equation model (PLS-SEM) and Smart PLS software to test the hypothesis.FindingsThis study finds a negative relationship between the host country's legal completeness (LC) or legal effectiveness (LE) and a contractor's compliance risk perception. Further, the results show potential absorptive capacity (PAC) and realized absorptive capacity (RAC) of a contractor are critical for mitigating the impact of low LC in the host country, but not when LE is low.Practical implicationsThe findings will be useful for international engineering contractors to respond to the compliance risk of the host country, both in choices of overseas investment locations and compliance capacity building.Originality/valueThis study reveals the impact of the host country's institutional environment on the compliance risk perception of international contractors, and provides theoretical guidance for how to alleviate the compliance barriers brought by the host country's institutional environment to international engineering contractors.

Global antimony supply risk assessment through the industry chain

Antimony is a type of critical metal for the energy transition. The antimony industry chain is distributed among the major developed and developing countries around the world. With the development of clean energy technology, the demand for antimony in photovoltaic and energy storage fields will increase significantly. Considering the significant changes in the global demand for antimony products and the serious supply shortage, people should pay more attention to the supply risk of related products of the antimony industry chain. In this paper, we propose a new integrated index to evaluate the supply risk of antimony industry chain related products, including Herfindahl Hirschman index, global governance index, human development index, global innovation index, and betweenness centrality in complex networks. Meanwhile, seven commodities in the antimony industry chain are selected for empirical analysis from 2011 to 2019. The results show that countries with high supply risks of the industry chain upstream include Canada, France, Germany, India, Japan, Thailand, and the United Kingdom. And, Australia, India, Japan, Thailand, and Vietnam are with high supply risks in the midstream of the industry chain. Meanwhile, Canada, India, Japan, and Thailand are with high downstream supply risks. Some countries, like China, the United States, and Germany, play a core role in different sectors of the industry chain. International competitive relations of countries have caused a high supply risk of products related to the antimony industry chain. The supply risk of the antimony industry chain shows that countries must strengthen industrial division and cooperation to maximize their interests. It is suggested to take the country-specific measures to mitigate supply risks, including establishing national inventories of critical materials, overseas investment, strengthening the guidance of industrial policies, and accelerating infrastructure construction.

Explaining Chinese SOEs’ risk tolerance in the developing world: Evidence from Chinese hydropower investment in Cambodia

In recent years Chinese state-owned enterprises (SOEs) have become a major source of development finance in the developing world. Although some Chinese SOEs are risk averse, others endure high risk as a result of public backlash from projects they conduct in host states. Why are some Chinese SOEs more risk tolerant than others when engaging in investment projects in the developing world? In order to explain this variation, the author explores the domestic political economy underlying Chinese SOEs’ overseas investment decision-making, arguing that SOEs with increasing overseas market share are less likely to pursue risky projects, acting as responsible stakeholders in developing countries. To illustrate this hypothesis, the author investigates Chinese-financed hydropower projects in Cambodia, drawing upon original research records gathered in China and Cambodia between 2017 and 2020. Comparative case studies yield the following findings: First, SOEs with increasing market share are less likely to engage in hydropower projects with significant environmental and ecological impact; second, SOEs are less likely to take on risky projects with financing from Chinese policy banks. This article indicates that variation among Chinese SOEs will ultimately result in diverse outcomes for and reactions to Chinese state-sponsored infrastructure projects in the developing world. It also sheds light on the need for more effective regulation from the Chinese government to ensure Chinese SOEs’ responsible overseas investment.

International Law Research on China’s Outward Foreign Direct Investment Under the Belt and Road Initiative

Taking the Belt and Road Initiative as the background, this paper explores the general situation and concentration of China’s direct investment in countries along the Belt and Road. At the same time, under the “One Belt and One Road” Initiative, China’s overseas investment is facing many risks, the current legal security system is difficult to adapt to the “One Belt and One Road” investment requirements, this paper further analyzes the “One Belt and One Road” Initiative, China’s foreign investment will face international law issues and related countermeasures.

Ownership diversity and fragmentation: A barrier to urban centre resilience

Fragmentation of ownership has long been a recognised constraint to UK city centre development, a complexity that is growing in significance as centres try to manage the decline in physical retailing and transform obsolete retail units. Yet, our understanding of the structure of ownership and how that might be facilitating or inhibiting urban change remains weak. In this paper, the objective is to address this gap by examining the structure and diversity of land ownership in five retailing centres - Edinburgh, Glasgow, Hull, Liverpool, and Nottingham – between 2000–2017 using original databases created by linking administrative and commercial property data sets. Overall, the analysis finds property ownership to be spatially complex with ownership richness and diversity generally rising over the study period. The study also reveals that ownership structure has been shifting away from financial institutions towards overseas investors, private individuals and unlisted property companies, implying greater fragmentation of ownership. While the greater diversity in ownership should stimulate competition and innovation in property market practices, the shift in balance from equity-rich larger investors towards smaller and sometimes unknown investors makes urban centre management harder to manage. This suggests policymakers need to rethink the urban governance model to find a better way to galvanise the actions of this increasing disparate group of stakeholders if their visions of more resilient, mixed use city centres are to be realised.

A New Perspective on Motivations Behind Chinese Overseas Investment: A Case Study on the Darwin Port Deal

This article explores the motivations underlying China's overseas investment by taking the Landbridge Group's takeover of the lease of Darwin Port as a case study. It discusses whether the Landbridge Group's deal was a government‐driven investment for particular strategic purposes. By studying the financing process of the Landbridge Group's deal, this article finds that contrary to the usual assumption that there are some clear political motives underlying the lease, the deal itself did not include a detailed investment plan or specific political goals, and was mainly driven by commercial interests. Additionally, it analyses the role of a local Chinese government in the deal and shows that it acted more like a benefit‐seeker after the deal was completed for its own bureaucratic interests.

Could Britain Continue with the Gold Standard in Absence of Colonial India?

ABSTRACT This paper dwells on the account, provided by de Cecco, of the functioning of the international gold standard, as steered by Great Britain. The arrangement relied on a few institutional aspects dealing with the acquisition and disposal of gold by Britain, not only as units of transactions but also to facilitate profitable investments overseas. India had a major role in providing gold flows, as political tributes, to meet the ‘Home Charges’ in the ruling country. Nationalist arguments in India on the ‘drain’ were centred on the legitimacy of using taxes in India to meet the overseas expenditure in Sterling. Further sources of financial transfers, were not recognised by the nationalists. This paper provides an outline of the multiple channels of transfers used to expropriate gold from India. Those routes include India's trade surpluses; ‘expenditure abroad’ as earmarked in the domestic budget; currency reserves; and the camouflaging of unproductive debts by Britain to justify the interest payments under Home Charges. This is a new interpretation of the mode and the magnitude of financial expropriations by Britain, supplementing the ‘Drain of Wealth’ narrative. The paper ends comparing the colonial expropriations from India and the subordinate finance in the neo-colonies under contemporary capitalism.

Assessing China’s Investment Risk of the Maritime Silk Road: A Model Based on Multiple Machine Learning Methods

The maritime silk road policy of China brings opportunities to companies relating to overseas investment. Despite the investment potentials, the risks cannot be ignored and have still not been well assessed. Considering the fact that ICRG comprehensive risk has certain subjectivity, it is not completely applicable to China’s overseas investment. Therefore, based on the data of the China Statistical Yearbook and International Statistical Yearbook, a new indictor is adopted to better capture the Chinese investment risk and to make our prediction more objective. In order to acquire the ability to predict the investment risk in the future which is essential to stakeholders, machine learning techniques are applied by training the ICRG data of the previous year and Outward Foreign Direct Investment (OFDI) data of the next year together. Finally, a relative reliable link has been built between the OFDI indicator in the next year and the left ICRG indicators in the last year with both the best precision score of 86% and recall score of 86% (KNN method). Additionally, the KNN method has a better performance than the other algorithms even for high-level risk, which is more concerning for stakeholders. The selected model cannot only be used to predict an objective and reasonable investment risk level, but can also be used to provide investment risk predictions and suggestions for stakeholders.

Environmental regulations and outward foreign direct investment-empirical evidence from Chinese enterprises.

In the context of the new economic normal, environmental protection and economic growth have become the focus of academic attention. This paper explores the effect and impact mechanism of environmental regulations on the outward foreign direct investment (OFDI) of enterprises by using data from the China Industrial Enterprise Database and the Directory of Overseas Investment Enterprises (Institutions) for the years 2004 to 2010. The findings are summarised as follows. Firstly, environmental regulations have a significant positive effect on the OFDI of Chinese enterprises, and this result remains robust after considering the outcomes of robustness tests and endogeneity issues. Secondly, the promotion effect of environmental regulations on the OFDI of Chinese enterprises obviously differs across investment motivations and industry characteristics. Thirdly, productivity gains are important channels through which environmental regulations promote the OFDI of enterprises. These findings have great significance for the effective formulation of environmental regulatory policies and the stable development of the OFDI of Chinese enterprises.

Is there “productivity paradox” in Chinese producer-service enterprises' OFDI?

As an important decision of enterprise internationalization, is there a similar phenomenon of “productivity paradox” in Chinese enterprises' overseas investment? We study this issue by using a sample of Chinese A-share listed firms in the producer-service industry from 2007 to 2019. According to our empirical results, there is no “productivity paradox” phenomenon in the OFDI of producer-service enterprises in China. In other words, the productivity of enterprises is positively correlated with OFDI. After using the different variable measures and adopting IV estimation, this conclusion is still robust. Our research also finds that cost reduction effect, R&D improvement effect and industrial linkage effect are the three main influencing mechanisms. By analyzing the heterogeneity of dimensions such as the nature of enterprise ownership, technology intensity, cultural distance of investment destinations, and whether they belong to the “OBOR” (One Belt, One Road), we find that productivity has a more significant effect on OFDI in SOEs, technology-intensive enterprises and enterprises whose investment destinations belong to non-OBOR, and with closer cultural proximity. This paper provides implications for Chinese enterprises on how to improve their international competitiveness through OFDI.

Modeling the strategies to accelerate the natural gas business market growth in a developing country

PurposeRising energy demand and the quest for achieving climate change targets have been pushing emerging markets like India to bolster the natural gas share in their energy mix. The country has set an aggressive target of increasing natural gas share in the energy mix to 15% by 2030. The purpose of this study is to acknowledge the need for adopting and developing strategies for natural gas business market development to ensure a reliable supply at an affordable price. Hence, this study explores the natural gas market business development strategies and assesses them through cause/effect analysis.Design/methodology/approachThis study proposed an integrated framework based on the Grey concept and Decision-Making Trial and Evaluation Laboratory (DEMATEL) technique to assess and determine the interdependence among the natural gas business market development strategies by cause-and-effect group analysis. The application of Grey theory reduced the uncertainty and subjectivity involved in the decision-making process. Later, sensitivity analysis is also performed to check the robustness of the framework.FindingsThe natural gas business market development strategies are identified through a systematic literature search and contributions from industry experts. The findings of this study highlight the importance of developing pipeline and storage infrastructure facilities, ensuring supply security through long-term imports and overseas investment, implementing free-market-based pricing, simplification and standardization of regulatory processes at state and national levels, etc., for the development of the natural gas market development in India.Research limitations/implicationsThis study acknowledges the natural gas market development strategies and evaluated them into cause-and-effect groups which are limited to Indian context. All evaluations in the Grey-based DEMATEL method were made in this study based on the decision team inputs which limits the generalization to other geographies. Moreover, the opinions of the experts can be subjective and differ. The selection of the experts is done through non-probability sampling process.Practical implicationsThis study could support the government and decision-makers in formulating the appropriate strategies to develop the domestic natural gas market. The cause-and-effect relationships are helpful for the companies, management, government, regulators and other stakeholders to understand the criticality of the causal strategies that must be implemented for developing the favorable natural gas business market scenario.Originality/valueThis study explores and evaluates the strategies that successfully bolster the natural gas business demand in India using Grey-based DEMATEL framework. By focusing on those critical strategies, relevant stakeholders would ensure a reliable natural gas supply at affordable prices.