Can Existing Theories Explain China’s Outward Foreign Direct Investment in Belt and Road Countries

Chang, Le; Jing, Li; Cheong, Kee Cheok; Goh, Lim Thye

doi:10.3390/su13031389

Cited by 16 publications

(14 citation statements)

References 70 publications

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“…Since the entry into the WTO, China has established cooperation and trade relations with more and more countries in the world, and the export-oriented economy continues to develop. Foreign direct investment plays an important role in international economic and trade cooperation [1]. Over the past decade, China's foreign direct investment has developed rapidly.…”

Section: Introductionmentioning

confidence: 99%

Risks and Strategies of China’s Direct Investment in Central Asia from the Perspective of Big Data

Huang

2022

Advances in Multimedia

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With the growth of Chinese economy and the improvement of its international status, Chinese enterprises foreign direct investment has ushered in new development opportunities. Although scale foreign investment continues to expand and has broad development prospects, it also faces huge risks that domestic investment has never had. China and Central Asia are highly complementary economically. Strengthening direct investment in the Central Asian countries can effectually drive China’s economic development. Based on the quantitative evaluation and analysis from the perspective of big data, this paper uses a variety of methods to evaluate and explore the risks of China’s direct investment in Central Asian countries, and gives some policy suggestions. The research shows that the motivation of Chinese foreign investment cooperation is different from the marginal industry transfer in the traditional international investment theory. The problem of country risks in Central Asia is prominent. Chinese government must rely on the build of the Belt and Road to strengthen intergovernmental communication and exchanges, and establish a good cooperation mechanism to deal with the increasingly prominent problem of country risks. Further we will improve trade facilitation and expand the trade openness of Central Asian countries to China. To avoid risks, Chinese companies should invest under the guidance of the government and establish a complete investment chain for large projects. At the same time, we also need to seize the opportunity of the development of digital economy, and gradually establish a scientific and efficient investment model to effectively avoid the risk of direct investment.

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Section: Introductionmentioning

confidence: 99%

Risks and Strategies of China’s Direct Investment in Central Asia from the Perspective of Big Data

Huang

2022

Advances in Multimedia

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“…Gautam et al [13] found no causal linkage between exchange rate and FDI inflow in China. For the fourth type of conclusion, scholars hold that the estimated influence of exchange rate on FDI inflow depends on the exchange rate system, economic structure, estimation characteristics, and the modelling approach [14,15]. To a certain extent, the fourth type of analysis can explain the inconsistency of empirical research conclusions based on the data from different countries.…”

Section: Introductionmentioning

confidence: 99%

Influence of Exchange Rate on Foreign Direct Investment Inflows: An Empirical Analysis Based on Co-Integration and Granger Causality Test

Tan

Gashaw

2021

Mathematical Problems in Engineering

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Although it is widely recognized that Foreign Direct Investment (FDI) inflows have a dominant effect on economic growth of host countries, the determinants of FDI inflows are still unclear. Especially, about the effect of exchange rate on FDI inflow, the results reached by scholars vary across countries or regions. It is of great practical and theoretical significance to explore the influencing effects of exchange rate on FDI inflow and identify the mechanisms that underlie them in close association with regional economic characters so as to help local government implement targeted government policies to achieve sustainable FDI inflow and sustainable economic growth. For this purpose, the influencing effects and the influencing mechanisms of the exchange rate on FDI inflows are investigated for Zhejiang province, China, over 1985–2019 by employing the co-integration tests, vector error correction models, Granger causality tests, and impulse response tests. Empirical results indicate that there are long-term stable and unidirectional causal relationship between the exchange rate and FDI inflow. Continuous appreciation of RMB against USD discourages FDI inflow. The mechanism which underlies the long-term relationship is the wealth effect, rather than the cost effect or the demand effect. By contrast, in the short run, neither the exchange rate nor the three influencing mechanism has a significant impact on FDI inflow. These results suggest policy recommendations for improving FDI by accumulating human capital and improving infrastructure. These findings are also applicable for other countries or regions with similar economic characters.

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“…Therefore the ownership advantage of eclectic does not provide a vivid explanation for such investments in emerging economies. Furthermore, due to high labor costs, manufacturing costs, and high transaction costs in developed economies compared to southern economies, location and internalization advantages also do not fully explain OFDI in emerging economies (Chang et al, 2021 ).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Economic factors such as labor, capital mobility, and human capital have significant positive implications for OFDI, both in developed and southern countries (Freckleton et al, 2012 ). Although the existing OFDI theories are derived from northern countries, Chang et al ( 2021 ) tested existing theories by using stochastic frontier analysis (SFA) methods and Pooled ordinary least squares (PLOS). The results show that most existing theories apply to China’s OFDI.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, most of the existing studies focus on the support effect of specific factors, few studies focus on the research on the theoretical system of investment (Peng et al, 2008 ; Kang and Jiang, 2012 ; Chang et al, 2021 ), and limited studies on the theoretical system do not involve the theoretical differences between the Northern and Southern countries (Frenken and Mbuvi, 2017 ; Djokoto, 2021 ). This study aims to apply the United States and China two representative countries in global north and south economies as example to reveal the differences in OFDI theoretical systems and how FDI responds differently to host country characteristics.…”

Section: Introductionmentioning

confidence: 99%

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The theoretical systems of OFDI location determinants in global north and global south economies

Liu

Zhu

et al. 2023

Humanit Soc Sci Commun

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With economic transformation and industrial development, Outward Foreign Direct Investment (OFDI) from southern countries has increased rapidly. The theoretical system established by global north countries with their dominant position in the international investment market has been impacted by global south countries. The existing OFDI theory has always been based on developed countries and can only explain some international investment behavior of southern countries. The Vector Error Correction Model (VECM) is applied to conduct empirical analysis for the impact of the target country’s investment climate on the location determinants of OFDI, by applying China and the United States as example which is focusing on 172 countries from 2005 to 2019. The results reveal significant differences in the theoretical system of foreign investment between China and the United States. For China, investment climate factors such as energy, logistics infrastructure, and politics are discover as the main drivers of China’s OFDI. However, USA’s OFDI is a corporate behavior aimed at economic interests. The differences in OFDI theoretical systems and provides policy advice for northern and southern countries and departments is the major contribution of this research.

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Can Existing Theories Explain China’s Outward Foreign Direct Investment in Belt and Road Countries

Cited by 16 publications

References 70 publications

Risks and Strategies of China’s Direct Investment in Central Asia from the Perspective of Big Data

Risks and Strategies of China’s Direct Investment in Central Asia from the Perspective of Big Data

Influence of Exchange Rate on Foreign Direct Investment Inflows: An Empirical Analysis Based on Co-Integration and Granger Causality Test

The theoretical systems of OFDI location determinants in global north and global south economies

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