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Chinese economic development, the next stage: outward FDI?

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  • Liu, Xiaohui
  • Buck, Trevor
  • Shu, Chang
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    Abstract

    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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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 14 (2005)
    Issue (Month): 1 (February)
    Pages: 97-115

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    Handle: RePEc:eee:iburev:v:14:y:2005:i:1:p:97-115

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    Related research

    Keywords: China Outward FDI Development path Co-integration;

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    Cited by:
    1. Narula, Rajneesh & Dunning, John H., 2009. "Multinational enterprises, development and globalisation: Some clarifications and a research agenda," UNU-MERIT Working Paper Series 023, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
    2. Kling, Gerhard & Weitzel, Utz, 2011. "The internationalization of Chinese companies: Firm characteristics, industry effects and corporate governance," Research in International Business and Finance, Elsevier, vol. 25(3), pages 357-372, September.
    3. Bonaglia, Federico & Goldstein, Andrea & Mathews, John, 2006. "Accelerated Internationalisation by Emerging Multinationals: the Case of White Goods Sector," MPRA Paper 1485, University Library of Munich, Germany.
    4. A. Amighini & M. Sanfilippo & R. Rabellotti, 2009. "The rise of multinationals from emerging countries. A review of the literature," Working Papers Prin 004, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Nagesh Kumar & Alka Chadha, 2009. "India's outward foreign direct investments in steel industry in a Chinese comparative perspective," Industrial and Corporate Change, Oxford University Press, vol. 18(2), pages 249-267, April.
    6. Christian Milelli & Françoise Hay, 2008. "Chinese and Indian firms’ entry into Europe: characteristics, impacts and policy implications," EconomiX Working Papers 2008-35, University of Paris West - Nanterre la Défense, EconomiX.
    7. Yi Zhang, 2009. "Unravelling the Complex Motivations behind China's FDI," Working Papers 09-02, Utrecht School of Economics.
    8. Narula, Rajneesh, 2010. "Much ado about nothing, or sirens of a brave new world?: MNE activity from developing countries and its significance for development," UNU-MERIT Working Paper Series 021, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.

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