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Outward Foreign Direct Investment from China: Recent Trend and Development

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Abstract

Along with the economy transition and industry upgrading in China, the outward foreign direct investment (OFDI) activities by Chinese enterprises have been steadily increasing during recent years. This study investigates the current status and the underlying motivations for Chinese firms to enter foreign markets. We discuss relevant economic policies that drive the recent trend of OFDI from China. The efforts by the Chinese government to promote innovations and cross-border economic collaboration paved the way for more OFDI opportunities in the future.

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... initiative and the establishment of the Asian Infrastructure Investment Bank (AIIB) backed by China have enabled it to play a more prominent role in financing infrastructure development as well as other massive industrial projects including the construction of highways, railways and hydro-power projects in Asian countries (Wang & Zhao, 2017). It has become an economic powerhouse and a key player in strengthening regional connectivity, enhancing international trade and further promoting cross-border investments in the region (Wang & Zhao, 2017). ...
... initiative and the establishment of the Asian Infrastructure Investment Bank (AIIB) backed by China have enabled it to play a more prominent role in financing infrastructure development as well as other massive industrial projects including the construction of highways, railways and hydro-power projects in Asian countries (Wang & Zhao, 2017). It has become an economic powerhouse and a key player in strengthening regional connectivity, enhancing international trade and further promoting cross-border investments in the region (Wang & Zhao, 2017). ...
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In the past years, China’s contributions to Cambodia’s infrastructure development have been increasingly felt and highly appreciated by a plethora of Cambodian government officials. However, critics have voiced concerns that China’s increased investment and aid in Cambodia’s infrastructure development would pressure the Cambodian government to implement a pro-China foreign policy and gradually undermine its independence in years to come. The key aim of this research paper, therefore, seeks to examine whether the Cambodian government’s behavior in accepting aid and investment from China is considered rational by proposing a framework built upon the literature of the rational actor model which is a linchpin of the rational approach. The outcome of the paper showed that the Cambodian government’s behavior in accepting China’s aid and investment and its close relations with China are not entirely rational as expected by the rational actor model. There are some instances in which the government has acted in a way that seems to defy the rational ideal. While China’s aid and investment benefit Cambodia, the Cambodian people, and the ruling government, they also entail some risks, which possibly push Cambodia into the Chinese sphere of influence, a debt trap, and even worsen Cambodia’s relations with other foreign governments.
... Doğrudan yabancı yatırımlar hızlandırıcı olarak, ülkelerin kalkınmasında, ekonomik olarak büyüme ve geliĢmesinde etkilidir. Doğrudan yabancı yatırımlar geliĢmiĢ ve geliĢen piyasalar arasında teknik bilginin daha hızlı dağılmasına ve uluslararası sermaye akıĢına olanak vermektedirler(Wang & Zhao, 2017). ...
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It is known that foreign direct investments have increased with globalization. Studies indicate that foreign direct investment contributes to the economic development of countries. It is stated that governance, which has gained popularity recently, is an important indicator taken into account by investors in directing foreign direct investment. This study investigates the impact of governance on foreign direct investment in 17 OECD countries between 2002 and 2019. FMOLS and DOLS estimators were used in the study, and as a result, it was determined that governance has a positive and significant effect on foreign direct investment flow in the long run.
... China is widely recognized and has been emerged as a global economic power-house since its opening up and economic reforms of 1978 (Muhammad et al., 2014). Due to industry up-gradation and economy transition China's ODI steadily increased (Wang & Zhao, 2017). From the last few decades, China has evolved to become a significant source of overseas direct investment in the global economy. ...
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This paper attempts to analyze the effects of China’s outward direct investment on environmental pollution in selected South Asian countries from 2004 to 2019 under framework of environmental Kuznet curve hypothesis. This empirical work is accomplished through fully modified ordinary least square. The findings of the full panel of fully modified ordinary least square indicates that China’s outward direct investment significantly spurs carbon emissions by (9.9%), which destroy the environment quality in the region. However, the estimated coefficients of the full panel of the fully modified ordinary least square indicates that (+) and (−) values of GDP and GDP square validate the environmental Kuznet curve hypothesis existence in the South Asia economies. Furthermore, when taking the individual countries, the environment consequences, individual characteristics of the countries and the GDP growth shows various temporal pattern of KEC hypothesis. Like in India there exist inverted U-shape curve, while Pakistan and Nepal manifest U-shape curve, whereas Bangladesh shows N-shape curve. Furthermore, this paper has identified bidirectional causality between economic growth, energy, financial development and carbon emissions. The empirical evidence implies that when governments consider foreign direct investment, they should priorities environmental protection mechanisms.
... Characteristically, the Chinese venture capital system is based on a continuous financing cycle; that is, the venture capital market's main task is to accumulate investor funds and place them in various innovative projects; for instance, green innovation for fashion brands even with ordinary apparel has been put forward from Chinese markets (Chen et al., 2021). Unlike the UAE, China tends to form its venture capital and direct investment funds for a specific project promoted by the state (Cheng, Hua et al., 2019;Wang & Zhao, 2017). ...
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This article examines the evolution of approaches to the content of venture capital based on the evolution of venture capital and venture capital investment, post-industrial society, institutional theory, and experience of forming the venture capital market in developing economies. Hypotheses of the functioning of venture capital in the transforming economy of the UAE and China are proposed and tested. An economical and mathematical model for assessing the efficiency of venture capital functioning has been developed. It was found that there is a particular relationship between the national characteristics of the country’s venture capital industry and the capital invested in innovative industries, as well as the production efficiency of these industries. Moreover, the attractiveness of venture capital investments somehow increases with investments in other sectors in both countries. Since the Chinese market evolved earlier than UAE, it has the most remarkable characteristics, including higher capital workforce ratios and higher exports of science and technology-intensive products. In addition, the Chinese market has a high level of development and focuses on a sustainable financing cycle than UAE.
... One reason for this result may be that traditional factor-driven investments promoted China's rapid economic growth before the country entered became the "new normal" after the mid-2010s. During this period, China's overseas investment focused on acquiring the resources needed for its development (Wang and Zhao, 2017). It was not until May 2015-when the State Council proposed the MIC2025 plan-that overseas investment in high-tech manufacturing with a strategic motivation gradually increased. ...
Article
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Purpose The study aims to analyze the role of the Made in China 2025 (MIC2025) initiative in China's Outward Foreign Direct Investment (OFDI) and the factors affecting the success or failure of Chinese enterprises' OFDI from the perspectives of the heterogeneity of home country enterprises. Design/methodology/approach Based on data on China's OFDI obtained from the China Global Investment Tracker (CGIT), the study uses the difference-in-differences model to analyze 2,670 completed OFDI deals and 211 failed OFDI deals by Chinese enterprises, from 2009 to 2018. Findings The study found that the effect of MIC2025 on Chinese enterprises' OFDI varies according to the ownership structure of the home country's enterprises. For successful OFDI, MIC2025 significantly impacted central state-owned enterprises (CSOEs), while it did not significantly influence local SOEs and privately owned enterprises. For failed OFDI, the MIC2025 plan only increased the failure of CSOEs' OFDI for the technology-seeking motivation in high-income host countries. Further, the investment options of local SOEs differ from those of CSOEs. Considering their aim to drive the local economy and seek profits, they are more similar to those of privately owned enterprises. Originality/value This study used a new database (i.e. the CGIT) to analyze Chinese enterprises' OFDI. It discussed the role of MIC2025 for different enterprises from the perspectives of successful and failed OFDI. It thus provided a new basis for analyzing policy affecting the OFDI of Chinese enterprises.
... However, there are significant changes in the allocation of foreign investment in developed economies. Given the value of concrete renewable energy policy funding, for instance political support, economic support, and regulatory aid, theoretical as well as realistic aspects for the spread of renewable energy, it assumes that certain particular considerations in the renewable energy field influence foreign countries directly (Keeley and Ikeda 2017;Sapkota and Bastola 2017;Wang and Zhao 2017;Essandoh et al. 2020). ...
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Greenhouse gases are considered an immense threat for the environment and humanity on the planet, and also cause the climatic change. The present analysis key aim was to explore the effect of CO2 emission on foreign investment, renewable energy utilization, and population growth in Pakistan. The ARDL bounds testing technique was applied to investigate the variables’ interaction via short- and long-run analysis. Furthermore, pairwise Granger causality method was also utilized to check the causal relation amid the study variables. Outcomes expose that CO2 emission has an adverse interaction with renewable energy with probability value (0.5497), while the variable foreign investment and population growth exposed a constructive association with carbon dioxide emission with probability values (0.3548) and (0.4217) consistently. Similarly, the results through long-run analysis expose that CO2 emission has an adverse influence to renewable energy usage with P-value (0.4646). Moreover, the results also uncovered that foreign investment and population growth has positive interaction with CO2 emission and having probability values (0.3577) and (0.5715). Solid steps are required from the Pakistani government regarding the demonization of CO2 emission in order to upsurge the economic progress.
... Scholars and commentators increasingly see China as a global superpower (Anngang 2012; Cao and Paltiel 2015;Fish 2017) and China's rise is widely understood to be ushering in a new global power distribution (Maher 2016;Shifrinson 2018;Tunsjø 2018;Zeng and Breslin 2016;Xuetong 2019). 1 China has the world's second largest economy, trailing only the United States (International Monetary Fund 2020). It was the world's leading exporter and second largest importer in 2018, the last year for which data were available (World Bank 2020a), and its foreign aid provision and outward foreign direct investment (FDI) have also grown over the last decade (Dreher et al. 2018;Kolstad and Wiig 2012;Wang and Zhao 2017). Accompanying China's economic rise has been an escalating assertiveness geopolitically (Liao 2018) that reflects China's growing hard power (Robertson and Sin 2017;Tayloe 2017) and soft power capabilities (Shambaugh 2015). ...
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It is increasingly clear that China’s economic and political power rivals that of the US. This is potentially a serious problem for multinational companies, since China’s rise could lead to more US–China trade conflict and disruption of supply chains, threatening new and ongoing foreign direct investment, and drawing other countries into the jostling for power. However, we argue that globalization is not necessarily endangered by China’s emergence as a comparable power to the US. The US and China both have vested interests in maintaining the open economic order, and these two countries are each providing the global public goods that incentivize economic openness among other countries of the world. In this paper, we develop a theory corresponding to this argument and provide evidence that globalization has not declined even as the global distribution of power has shifted. While global integration is likely to persist, disruptive skirmishes between the US and China will occur with some regularity. Therefore, we suggest that international company strategies today should focus more on risk management related to policy shifts stemming from China’s rise and less on achieving least-cost global supply chains. We present a risk management framework for this purpose.
... These projects are largely delivered through Chinese SOEs, which in 2005 controlled 83 per cent of the country's outbound investment flows. Despite a recent gradual decrease, SOEs still monopolize several sectors, including oil and gas, telecommunications and construction (Kolstad and Wiig 2012;Wang and Zhao 2017). As a national policy instrument, SOEs implement China's foreign assistance as well as seek profits. ...
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The literature on the relationship between foreign aid and institutions has found that the effects of aid vary across different donor characteristics and delivery mechanisms. This article focuses on China's resource-related development projects, which have been considered controversial due to the relative lack of conditionality. By distinguishing between vertical and horizontal dimensions of political accountability, the study finds that China's resource-related projects are particularly detrimental to the accountability of recipient countries' horizontal (legislative and judicial) institutions. These projects are often delivered to resource-rich countries, in the form of packaging access to resources and infrastructure construction, to improve China's own energy access. Local officials may be tempted to weaken horizontal institutions so that the projects can be implemented quickly. Nevertheless, these projects have little effect on vertical accountability, as China has less intention and capacity to fundamentally restrain electoral competition in recipient countries.
... Outbound investment was not even permitted until 1979. Efforts towards actively encouraging outward investment first started to take root when the "going out" or "go global" strategy was implemented in 2001 (Wang & Zhao, 2017), though the government was extremely selective about which firms could go abroad. Additionally, privately owned Chinese firms have only been allowed to invest abroad since 2003 (Buckley et al., 2007). ...
Article
China has rapidly become one of the leading source countries for foreign direct investment (FDI), though many aspects of Chinese capital remain under examined. In this study we analyze the sociopolitical determinants of Chinese FDI, paying particular attention to the role of human rights and democracy. We hypothesize that Chinese capital is drawn to host countries with worse human rights conditions, given the lack of sensitivity that Chinese firms – particularly state-owned enterprises – have to potential “spotlighting” as well as the underdeveloped status of corporate social responsibility (CSR) practices. However, we posit that Chinese firms will be drawn to more democratic hosts due largely to experiential learning effects (negative experiences with autocratic hosts) and pragmatic advantages of investing in a state with democratic institutions. We test these hypotheses across 195 countries for the years 2005–2013, and find Chinese FDI to be negatively and significantly related to physical integrity rights and positively related to democratic institutions.
... The focus of Chinese investments are the resource industries of the host countries (Y. Wang & Zhao, 2017). To work on its aim of globalization, china has established its regional forums in the European countries and these forums help the Chinese investors to learn about the patterns in those countries so that they can estimate the benefit ratio and go for internationalization of the firms with a clear agenda (Tan & Delios, 2017). ...
Experiment Findings
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The study employed the cross-sectional panel data in the model because the numbers of cross sections are greater than the number of time series. In this context, to check the stationarity in variables’ data, the researched test the unit root in data by employing LLC Unit Root Test (Levin, Lin and Chu, 2002). The test is most efficient to check the unit root in panel data. Before switching towards formal estimation, it is requisite to check the stationarity in dataset. The null hypothesis of the test is that data is stationary and there is no unit root in data. The rejection and acceptance of hypothesis are based on the p-values of test. The evidence of unit root in data indicates that data is not mean reverting and have no same variance. Some variables in data are stationary at zero order or level while some at 1st order. The following equation of LLC unit root is proposed to check the unit root in data Where i denotes cross section, i= 1, 2 , …N(developing countries) Where t denotes time series, t= 1, 2 , … T (number of years) Here in equation 2 is the difference, denotes order of integration. Where shows for ith country for the specific time period of t.
... The focus of Chinese investments are the resource industries of the host countries (Y. Wang & Zhao, 2017). To work on its aim of globalization, china has established its regional forums in the European countries and these forums help the Chinese investors to learn about the patterns in those countries so that they can estimate the benefit ratio and go for internationalization of the firms with a clear agenda (Tan & Delios, 2017). ...
Preprint
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China is one of the populous and developed nations around the globe. The economy of china is transitioned from a centrally planned system to a market-oriented country. The outward foreign direct investment and import and export both play a crucial role in the growth or development of an economy. There is growing evidence that the COFDI increases the country's investment, competitiveness as well as helped in sustainable growth. The following study designed to evaluate the impact of OFDI on the export level of china whether positively or negatively. The study has the main objective is to analyze the role of outward foreign investment on the growth of the country in terms of exports. At the same time, the impact of some control variables has also analyzed such as Chinese imports, total reserves, Chinese net foreign assets, and Chinese GDP growth. In addition, the various previous studies have analyzed in order to study the findings and analysis of the OFDI and Chinese exports level. Mainly, the data has been collected and accessed from the export level. The major data of OFDI and Chinese exports collect to form the available database of the World Bank group. The secondary data collected and analyzed of 40 countries in total, from this half of the countries are developed and the other half are developing nations. Furthermore, the results and findings of the table indicate that the OFDI under china significantly affects the economic position of the country through growth in export level. This has examined through the past export level position of china. It has examined that during the last few years, the export level of the country has increased and the primary reason behind the increase in export level is the investment as well as growth in OFDI. Finally, the results and findings of the study have significantly provided the benefits to the economy as well as policymakers. The results benefit to enhance the role of OFDI in order to enhance export growth.
... The focus of Chinese investments are the resource industries of the host countries (Y. Wang & Zhao, 2017). To work on its aim of globalization, china has established its regional forums in the European countries and these forums help the Chinese investors to learn about the patterns in those countries so that they can estimate the benefit ratio and go for internationalization of the firms with a clear agenda (Tan & Delios, 2017). ...
Research
China is one of the populous and developed nations around the globe. The economy of china is transitioned from a centrally planned system to a market-oriented country. The outward foreign direct investment and import and export both play a crucial role in the growth or development of an economy. There is growing evidence that the COFDI increases the country's investment, competitiveness as well as helped in sustainable growth. The following study designed to evaluate the impact of OFDI on the export level of china whether positively or negatively. The study has the main objective is to analyze the role of outward foreign investment on the growth of the country in terms of exports. At the same time, the impact of some control variables has also analyzed such as Chinese imports, total reserves, Chinese net foreign assets and Chinese GDP growth. In addition, the various previous studies have analyzed in order to study the findings and analysis of the OFDI and Chinese exports level. Mainly, the data has been collected and accessed from the export level. The major data of OFDI and Chinese exports collect to form the available database of the World Bank group. The secondary data collected and analyzed of 40 countries in total, from this half of the countries are developed and the other half are developing nations. Furthermore, the results and findings of the table indicate that the OFDI under china significantly affects the economic position of the country through growth in export level. This has examined through the past export level position of china. It has examined that during the last few years, the export level of the country has increased and the primary reason behind the increase in export level is the investment as well as growth in OFDI. Finally, the results and findings of the study have significantly provided the benefits to the economy as well as policymakers. The results benefit to enhance the role of OFDI in order to enhance exports growth.
... The focus of Chinese investments are the resource industries of the host countries (Y. Wang & Zhao, 2017). To work on its aim of globalization, china has established its regional forums in the European countries and these forums help the Chinese investors to learn about the patterns in those countries so that they can estimate the benefit ratio and go for internationalization of the firms with a clear agenda (Tan & Delios, 2017). ...
Article
Full-text available
China is one of the populous and developed nations around the globe. The economy of china is transitioned from a centrally planned system to a market-oriented country. The outward foreign direct investment and import and export both play a crucial role in the growth or development of an economy. There is growing evidence that the COFDI increases the country's investment, competitiveness as well as helped in sustainable growth. The following study designed to evaluate the impact of OFDI on the export level of china whether positively or negatively. The study has the main objective is to analyze the role of outward foreign investment on the growth of the country in terms of exports. At the same time, the impact of some control variables has also analyzed such as Chinese imports, total reserves, Chinese net foreign assets and Chinese GDP growth. In addition, the various previous studies have analyzed in order to study the findings and analysis of the OFDI and Chinese exports level. Mainly, the data has been collected and accessed from the export level. The major data of OFDI and Chinese exports collect to form the available database of the World Bank group. The secondary data collected and analyzed of 40 countries in total, from this half of the countries are developed and the other half are developing nations. Furthermore, the results and findings of the table indicate that the OFDI under china significantly affects the economic position of the country through growth in export level. This has examined through the past export level position of china. It has examined that during the last few years, the export level of the country has increased and the primary reason behind the increase in export level is the investment as well as growth in OFDI. Finally, the results and findings of the study have significantly provided the benefits to the economy as well as policymakers. The results benefit to enhance the role of OFDI in order to enhance exports growth.
... The focus of Chinese investments are the resource industries of the host countries (Y. Wang & Zhao, 2017). To work on its aim of globalization, china has established its regional forums in the European countries and these forums help the Chinese investors to learn about the patterns in those countries so that they can estimate the benefit ratio and go for internationalization of the firms with a clear agenda (Tan & Delios, 2017). ...
Experiment Findings
Full-text available
Research objectives Based on the problems and issues identified and the need for the development of theoretical evidence on this topic, following objectives were determined for the research study. These objectives will fill the gaps in the literature and the answers to these will provide evident information that will be further used for theoretical and practical purposes. Moreover, it will also develop understanding of the Chinese OFDI and the policies they used for their business promotion and internationalization. 1- To determine the role of Chinese OFDI in the export of country. 2- To investigate whether the Chinese OFDI enhance the export of China or not. 3- To provide the suggestions to improve export of China through outward foreign direct investments.
... China's potential of growth rate Li and Whalley (2012) stated that the last few decades of China trade has generated remarkable trade surplus which have financed an accumulation of foreign reserves. In-fact, the China's economic development and GDP growth rate increased highly due to its government policies (Wang & Zhao, 2017). Exports performed a key role in country's economic growth which in turn have produce adjustment resistance in importing countries. ...
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... To achieve this, they have invested hundreds of million dollars in government biotech research. In addition, they enacted policies to encourage research conducted by private firms providing money from state owned banks to finance the purchase of the Swiss agrochemical firm Syngenta for $43 billion by ChemChina, an enormous, diversified state-owned enterprise (SOE) (Wang and Zhao, 2017). ...
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China has put in place a series of policies to support private companies to engage in biotechnology research. This study uses data from a survey of 103 major agribusiness firms in the agricultural chemical and seed industries in China to evaluate the impact of government policies on private R&D investment in biotechnology. The results show that firms with positive profit expectation, public R&D subsidies, R&D collaboration with universities/research institutes or state-owned enterprises are more likely to embark on biotechnology research activities. Past patenting activity, R&D subsidies and collaboration with public sector research increase firms' biotechnology R&D investment while firms already selling genetically modified products and firms that are state-owned spend less on R&D. Our findings suggest that government policy does have an important impact on firms' biotechnology R&D investment.
... Furthermore, the 'Go Global' policy set a strong institutional environment with national public endorsement that fostered OFDI (Child and Rodrigues, 2005). The 'Go Global' policy contributed to the rising trend of Chinese OFDI subsequently (Luo et al., 2010;Wang and Zhao, 2017). In compliance with Evolution of China's Outward Foreign Direct Investment Regime 9 accession of the WTO in 2001, China gradually opened its once protected markets (Qin, 2007). ...
Article
Assessment of the likely impact of Chinese OFDI on the ASEAN members of the Belt and Road Initiative (BRI) requires understanding of the evolution of Chinese policy, regulations and institutions. Utilizing recent developments in institutional theory, this paper examines the interplay between China’s OFDI regulations and enterprise supportive policies. Liberalization of FDI regulations complements policies of technological catch-up and the development of regionally focused multilateral institutions. Evidence of an increasing level of Chinese OFDI since 2003, and of a larger share attracted to the BRI group, particularly the ASEAN countries, is consistent with the theorizing.
Chapter
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Dipnot Bilgisi: Ferhat Durmaz, “Çin’in Kuşak-Yol Girişimi ve Malezya: Temel Dinamikler, Projeler ve İşleyiş”, İçinde; A. Merthan Dündar ve Mehmet Özay (Ed.), Türkiye’de Malezya Çalışmaları-1, Ankara: Ankara Üniversitesi Yayınları, 2022, ss. 259-297.
Chapter
When President Rodrigo DuterteDuterte of the Philippines assumed office in 2016, his trips to China and their resulting bilateral economic agreements attracted significant attention. To many observers, these reflected a pivot toward China. However, DuterteDuterte also traveled to Japan, with bilateral talks resulting in economic agreements as well. The respective state visits of Shinzo Abe and Xi Jinping to the Philippines in 2017 and 2018 further hint at what appears to be a strategic repositioning of these countries with both each other and the Philippines. The focus of this chapter is the investment and aid dimensions of these economic agreements. How does China’s development partnership with the Philippines in terms of investment and aid compare to that of Japan? How do these countries’ relations with the Philippines contribute to the narratives on investment and aid? This study analyzes the economic relationship of these countries with the Philippines by considering empirical data on these indicators, the tenor of the discourse, and perceptions. The research is informed by the increasing entrenchment of China’s economic presence in both the Philippines and Southeast Asia amid Japan’s historically dominant role in the region through its postwar development initiatives.
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The study aims to investigate the impact of China's outward foreign investment (OFDI) in Cambodia, Laos, Myanmar, Vietnam, and Thailand (CLMVT). The motivation behind this paper is to examine a pivotal role in determining the macroeconomic factors in these five hosting countries as the “neighboring model” of China. Using panel data for China's outward to her five neighboring countries in the Greater Mekong Subregion (GMS) for the period 2007–2019. This paper uses two different panel specifications models named correlation from classical statistics and Bayesian statistics where empirical results of this research qualify that China's OFDI is the main factor to have a positive influence on the macroeconomic factors in CLMVT. • Highlights • The GMS region is currently challenging the general FDI theory from the “neighboring model” of China’s going global” strategy using OFDI as a pioneer for success for the small developing country namely, CLMVT. Many studies showed that the implementation of the “Belt and Road” strategy will help China increase investment in countries along the route, which will further promote the implementation of the “on going” strategy since 2013. • We use panel data for China's outward to her five neighboring countries in the Greater Mekong Subregion (GMS) for the period 2007–2019, measures the potential of China’s outward foreign direct investment by using two different panel specifications models named correlation from classical statistics and Bayesian statistics. • This research implements the core concept of Bayes’ theorem. This theorem allows us to use a priori beliefs of probability to combine with evidence that it can be found (update every economic situation in CLMVT countries) then this method will have a new prediction of the posterior probability distribution. The posterior probability distribution will be received from the simulation algorithm once again. It would be calculated from the scope of every scenario that can be happening based on our belief in the future. • The Bayesian correlation testing still confirms that the FDI inflow from China per GDP of CLMVT countries has the most play important role to drive the macroeconomic of these five countries’ economy.
Article
With the rapid increase of China's outward foreign direct investments (OFDIs) since the early‐2000s, a growing body of literature has developed that investigates investment processes and their underlying motivations and tendencies. Three important findings emerge from this literature. First, it has been noted that the generation of market and resource access have been key drivers of investment activity. Second, China's OFDIs have accordingly focused on mature manufacturing and natural resource sectors. Third, a large proportion of OFDIs is assumed to have been directed to neighboring countries in East Asia or other developing economies, for instance in Africa. However, a literature review reveals limitations in prior studies with respect to measurement biases, database incompatibilities, the neglect of a knowledge perspective, and a lack of sectoral differentiation. Descriptive analysis based on a comprehensive firm‐level data set of greenfield investments shows that previous findings are only partial. According to fDi Markets data from 2003 to 2016, OFDIs from China are more diversified and widespread than assumed. Many recent investments have a distinct knowledge motivation, are focused on high‐tech and business service sectors and non‐manufacturing functions, and are directed toward developed economies.
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The present study investigates the impact of Chinese outward foreign direct investment (OFDI) on the comparative advantage (CA) of the Belt and Road countries (BRCs). This study uses the national-level panel data of Chinese OFDI flowing into 62 BRCs and disaggregated sectoral data from BRCs categorised by factor intensity from 2003 to 2017 and applies dynamic system generalised method-of-moments (GMM) estimators with instrument variables. The findings suggest that Chinese OFDI has a strong positive effect on the CA of BRCs in natural resource-intensive industries, a relatively weak positive effect on the CA of BRCs in labour-intensive textile, garment and footwear sectors, and a negative effect on the CA of BRCs in other labour-intensive sectors. Additionally, Chinese OFDI has a negative effect on the CA of BRCs in capital- and technology-intensive sectors, but the impact is positive in high-income BRCs. In contrast, non-Chinese OFDI shows a negative effect on the CA of BRCs in the natural resource industry, while non-Chinese OFDI significantly promotes labour-intensive industry and capital technology-intensive industry. Under the Belt and Road Initiative, BRCs are required to facilitate or prioritize Chinese investment in sectors complying with their own development strategies and resource endowments.
Article
This paper empirically investigates the impact of China’s OFDI on the industrial structure upgrading of countries along the Belt and Road (B&R) and examines the threshold effect of the infrastructure levels on that impact based on the panel data of 52 B&R countries from 2006 to 2017. The results show that China’s OFDI can significantly promote the industrial structure upgrading of B&R countries and that the Belt and Road initiative implementation can help to strengthen the promoting effects of China’s OFDI in the comprehensive FGLS, the Diff-GMM and the System GMM estimation. Moreover, China’s technology transfer OFDI has the greatest promotion effect, followed by capital transfer OFDI; labor transfer OFDI has the least promotion effect. China’s OFDI plays a larger role in promoting the industrial structure upgrading of Central Asia and South Asia countries, followed by ASEAN and CIS countries and it plays a smaller role in West Asia and Central-Eastern Europe countries. There is a threshold effect of the B&R countries’ infrastructure level. When the transportation infrastructure, energy infrastructure, communication infrastructure and overall infrastructure levels exceed the corresponding thresholds, the promoting effect of China’s OFDI will be further enhanced in the comprehensive FGLS estimation. Our study proposes that under the Belt and Road initiative, to improve the infrastructure level of the B&R countries, and to increase the effectiveness of China’s OFDI in promoting the industrial structure upgrading of the B&R countries, China should further strengthen international cooperation, expand outward investment, and strengthen the infrastructure connectivity construction with B&R countries.
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The Belt and Road Initiative (BRI − also known as One Belt One Road (OBOR)−is undoubtedly one of People’s Republic of China’s (PRC) largest yet most controversial development program of its kind worldwide. In the light of the controversy, the paper aims to study Malaysia’s perception and strategy toward China’s BRI expansion since the Najib’s administration. Based on the political economy analysis of Malaysia’s response from Najib to Mahathir 2.0 administrations, the paper focuses on the interaction between state and non-state actors such as the corporations, political parties and non-government organizations (NGOs). Particular attention will be given to the question of what accounts for the continuity or change in Malaysia’s perception and strategy toward China’s BRI expansion during the two different administrations. Given the institutional setting that gives rise to concentration of political and economic power in the hand of prime minister in Malaysia, its leadership plays a vital role in shaping the outcome of China’s BRI expansion in the country.
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The chapter summarizes the key ideas and issues described in previous chapters.
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This chapter describes how Western and domestic firms are competing in the various sub-segments of the Chinese market. The analysis begins with the impact of China’s Open Door policy and of Foreign Direct Investments in China by Western multinationals. Then, we consider China’s Go Global strategy and recent trends in Chinese expansion abroad via greenfield and non-greenfield investments. Some interesting cases are analysed in a bid to understand the motives behind the growing integration of the Chinese healthcare industry in the global value chain. This chapter also addresses the challenges for Chinese firms on the global market, as well as the opportunities that China’s healthcare industry can bring to foreign investors.
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Cette thèse porte sur les stratégies d’internationalisation des firmes chinoises, particulièrement celles qui s’implantent en Europe. À travers une série d’études empiriques nous visons à traiter plusieurs aspects au regard des stratégies employées par ces firmes chinoises. À travers une première étude de cas, nous avons identifié différents parcours internationaux adoptés par les firmes chinoises en référence avec les théories existantes. Par la suite, nous avons conduit à travers une deuxième étude de cas, une analyse comparative de deux cadres théoriques distincts (modèle OLI et LLL). Cela nous a permis de souligner le pouvoir explicatif important de ces deux théories durant des périodes et des contextes différents dans lesquels les firmes chinoises se sont situées. Troisièmement, nous avons visé plus spécifiquement les partenariats entre les multinationales chinoises et les PME françaises. Ce travail a souligné comment ces deux types de firmes, par la combinaison de leurs asymétries réciproques, peuvent surmonter diverses difficultés de leur développement respectif. Au final, selon le concept de distance psychique proposé par le modèle d’Uppsala, nous avons analysé l’impact de la distance psychique dans le cas des multinationales chinoises. Sur la base d’une étude quantitative, cette fois-ci, nous avons proposé qu’en raison de diverses évolutions sociétales (avancement des technologies d’information ; amélioration des moyens de transport, etc.) et de certaines capacités de ces firmes chinoises, les difficultés liées à la distance psychique rencontrée par ces firmes sont inférieures à celles envisagées par le modèle d’Uppsala.
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The aim of this research is the investigation of strategic behavior of Chinese investors in Japan when making cross-border acquisitions in recent times. While previous literature on acquisitions tended to show that Chinese acquirers were merely resource-driven, i.e. their main purpose was to acquire products, brands, and knowledge to be transferred back to the (Chinese) home market, our study suggests that the behavior of many Chinese firms has changed lately. In a pivotal study with 39 Chinese bidders taking over Japanese targets, we find that their strategy has become increasingly market-driven instead. As far as industry-wise acquisitions are concerned, Chinese firms are taking over Japanese hotels and recreation facilities in recent years for the purpose of providing services to Chinese tourists.
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More Chinese companies are using cross-border merger and acquisition (M&A) to access and source strategic assets so as to address their competitive disadvantage. However, there is lack of research on the rationale for such strategic-asset-seeking M&A. This paper intends to address this critical issue from an institutional perspective. Building on institutional theory, we propose a model of resource-driven motivation behind Chinese M&A. To shed light on the explanatory power of this institutional framework, we draw on a multiple-case study of three leading Chinese firms—TCL, BOE and Lenovo. By arguing that cross-border M&A from Chinese firms represents a means to acquire strategic assets is the logic of Chinese unique institutional environment, this study is of importance not only to stimulate possible theoretical extensions but also to draw implications to other emerging market firms.
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As more Chinese companies become engaged in foreign direct investment (FDI), particularly in industrial countries, a crucially important issue must be addressed: what is the motivation of Chinese outward FDI, and what is its rationale? Based on a detailed analysis of both primary and secondary data sources, this article argues that when investing in advanced economies, Chinese multinational corporations (MNCs) are motivated primarily by the quest for strategic resources and capabilities, and that the underlying rationale for such asset-seeking FDI is strategic needs. The examination of this premise will hopefully prompt business practitioners to think about this important issue in new and innovative ways, thereby identifying an appropriate policy and strategic response.
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Since 2003, China has been one of the most significant sources of outward foreign direct investment (FDI) in the world. How did this happen? What are the features of Chinese outward direct investment (ODI)? Are they different from developed-country FDI? Why do Chinese firms go multinational? What competitive advantages do Chinese firms have in going multinational? The Chinese ODI boom is a result of China's rapid economic growth and its "going-global" strategy. Chinese multinational firms are similar to those in developed countries in many respects, but differ largely in ownership structure. Their competitive advantages are derived mainly from China's institutional organization and efficient management in the production process. Four motivations of Chinese ODI are: to maintain and expand international markets, to secure a supply of key resources, to obtain firm assets from advanced economies, and to seek overseas opportunities with an international vision.
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Chinese outward foreign direct investment (FDI) has increased substantially in recent years. Though this has generated considerable interest in the motivations and drivers of Chinese investment abroad, there have been few systematic empirical studies of these questions. This paper performs an econometric analysis of the host country determinants of Chinese outward FDI in the period 2003-2006. The focus is in particular on institutional and natural resource-related determinants, and their interaction. We find that Chinese outward FDI is attracted to large markets, and to countries with a combination of large natural resources and poor institutions. Disaggregation shows that the former effect is related to OECD countries, whereas the latter interaction effect holds for non-OECD countries.
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The People’s Republic of China has the world’s largest population and the third-largest land area, and is one of the biggest countries in terms of ecological scale. Since the 1980s it has been one of the few countries to continue long-term rapid economic growth. These facts are reflected in much research on China’s environmental problems and initiatives. Observations made thus far on the characteristics of China’s environmental problems can be summarized as follows.
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This study examines the forces driving outward FDI of emerging-market firms. Its contribution lies in integrating and testing insights from institutional theory, industrial organization economics and the resource-based view of the firm. This approach enables us to consider three different levels of analysis – firm, industry and country – and, thus, to distinguish between different sources of variation. Using a large firm-level Chinese dataset, we offer new evidence indicating that government support and the industrial structure of the home country of the investing firm play a crucial role in explaining outward FDI. By contrast, technological and advertising resources tend to be less important. The findings have important implications for theorizing. Although some firm-specific idiosyncrasies still play a role in explaining variations across firms in the same industry, the theoretical analysis and empirical results consistently indicate that foreign investment of Chinese firms is largely driven by their distinctive institutional and industrial environment.
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It is now receiving wide attention that since the adoption of the open-door policy at the end of the 1970s China has been extremely successful in attracting foreign direct investment (FDI). Particularly, according to UNCTAD's World Investment Report 1997: Transnational Corporations, Market Structure and Competition Policy, China has become the second largest recipient of FDI in the world since 1993, after the United States. On the other hand, however, it seems less noticed that China has also become a growingly important FDI exporting country. According to UNCTAD's same report, China now ranks as one of the largest outward investors among developing economies in the 1990s. By the end of 1996, the cumulative stock of Chinese outward FDI had reached over $18 billion, next only to Hong Kong ($112 billion), Singapore ($37 billion) and Taiwan ($27 billion). Consequently, China increased its share in world-wide FDI outflows from less than 0.5 per cent until 1991 to an average of 1.3 percent in 1991-95. As China is rapidly rising as a new economic power, its deepening participation in the regional and global economy, through both inward and outward FDI as well as trade, will inevitably bring about significant implications in the international political economy. This article attempts to explore the development of Chinese outward FDI, its characteristics and motives, the outward FDI regime, the government's policies and existing problems, and the prospects for the future trend of Chinese outward FDI.
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Foreign direct investment (FDI) can benefit innovation activity in the host country via spillover channels such as reverse engineering, skilled labor turnovers, demonstration effects, and supplier–customer relationships. Using provincial data from 1995 to 2000, we find positive effects of FDI on the number of domestic patent applications in China. This finding is robust under both pooled time-series and cross-section data estimation and panel data analysis and for different types of patent applications (invention, utility model, and external design). The spillover effect is the strongest for minor innovation such as external design patent, highlighting a “demonstration effect” of FDI.
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Large scale outward foreign direct investment (OFDI) by emerging market enterprises has become common in today's business world. Nested within the political economy perspective, this article elucidates why and how emerging market governments enthusiastically stimulate OFDI. Drawing upon our detailed analysis of the Chinese context, we developed the logic that OFDI promotion policies set by emerging market governments are economically imperative and institutionally complementary to offsetting competitive disadvantages of emerging market enterprises in global competition. This study presents the governmental institutions that impact Chinese OFDI, discusses evolutionary changes of OFDI policies, and describes current policies and measures that stimulate Chinese companies to expand into the global market. This article concludes with theoretical and managerial discussions wherein we call for convergence between two seemingly paradoxical views – institutional escapism and governmental promotion – presently used as an institutional logic explicating international expansion of emerging market enterprises.
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China's development path has been widely recognised as being unique, with gradual privatisation and marketisation, massive private capital inflows, and extensive exporting. All this has been achieved without political democratisation. This paper draws attention to a new emerging phenomenon—significant Chinese levels of outward FDI (OFDI)—and takes a first step towards understanding this development at an aggregate level.The question arises, is China's OFDI another unique characteristic of Chinese distinctive economic development path and reform policies, or does it follow an established, universal pattern, specifically Dunning's investment development path (IDP) hypothesis, or rather a refined version of the IDP? In other words, do Chinese OFDI patterns suggest refinements to established theories, or even their refutation?To address these questions, however, exogeneity tests reveal a need to use GMM estimation methods rather than straightforward regressions, since relations between economic development and OFDI are complex and inter-dependent.The GMM results suggest that the level of economic development, proxied by GDP per capita plus refinements, is still the main factor explaining China's rate of OFDI. This is quite consistent with the refined IDP hypothesis and patterns broadly noted elsewhere. Conclusions are drawn for theory, policy and international business.
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Recent empirical work has examined the extent to which international trade fosters international “spillovers” of technological information. FDI is an alternate, potentially equally important channel for the mediation of such knowledge spillovers. I introduce a framework for measuring international knowledge spillovers at the firm level, and I use this framework to directly test the hypothesis that FDI is a channel of knowledge spillovers for Japanese multinationals undertaking direct investments in the United States. Using an original firm-level panel data set on Japanese firms' FDI and innovative activity, I find evidence that FDI increases the flow of knowledge spillovers both from and to the investing Japanese firms.
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We find for 14 industrialized countries over the period 1971–2005 that outward FDI has positive long-run effects on domestic output. Our results suggest that increased outward FDI is both a cause and a consequence of increased domestic output.
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Multinationals may enter a host market by different modes of foreign direct investment (FDI). This paper examines the choice of FDI mode, and shows that the profitability of greenfield investment influences this choice not only directly, but also indirectly since it determines the outside option of potential acquisition targets and joint venture partners. In particular, even if greenfield investment is a viable option, the multinational may prefer a joint venture to M&A, and M&A to greenfield investment, provided that M&A and joint venture both involve sufficiently low fixed costs. The reason is that the profitability of greenfield investment both reduces the acquisition price in the case of M&A, and gives local firms an incentive to agree to a joint venture.
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