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The Determinants of Chinese Outward Foreign Direct Investment: A Closer Look

Author

Listed:
  • Muhammad Zubair Mumtaz

    (School of Social Sciences & Humanities, National University of Sciences & Technology, H-12, Islamabad, Pakistan)

  • Zachary Alexander Smith

    (Department of Economics, Saint Leo University, Saint Leo, FL 33574, USA)

Abstract

Over the last fifteen years, China rapidly expanded its outward foreign direct investment (OFDI) through remarkable economic growth and the ¡°go global¡± policy. Chinese firms explored investment avenues especially in developing and emerging countries. As a result, China became the third largest contributor of OFDI. We examine the determinants of Chinese OFDI in 67 countries during the period lasting from 2006 to 2015 using the feasible generalized least square method. We find that the size of the economy, market opportunities, cost advantages due to low wage structure, ease of doing business, country risk, and geographical proximity are the prominent factors leading to changes in Chinese OFDI in developing and emerging economies. We find that China¡¯s investments in different developing and emerging countries are driven by a different set of factors and the determinants of Chinese OFDI vary in low and high per capita income countries.

Suggested Citation

  • Muhammad Zubair Mumtaz & Zachary Alexander Smith, 2018. "The Determinants of Chinese Outward Foreign Direct Investment: A Closer Look," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 13(4), pages 577-601, December.
    • Handle: RePEc:fec:journl:v:13:y:2018:i:4:p:577-601
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0027-9
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    Citations

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    Cited by:

    1. Scott Rozelle & Yiran Xia & Dimitris Friesen & Bronson Vanderjack & Nourya Cohen, 2020. "Moving Beyond Lewis: Employment and Wage Trends in China’s High- and Low-Skilled Industries and the Emergence of an Era of Polarization," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(4), pages 555-589, December.
    2. Valmor Comim Junior, 2021. "Literature review on Drivers of Chinese Outward Foreign Direct Investment," International Journal of Science and Business, IJSAB International, vol. 5(4), pages 143-157.
    3. Pan, Xiongfeng & Li, Mengna & Wang, Mengyang & Chu, Junhui & Bo, Hongguang, 2020. "The effects of outward foreign direct investment and reverse technology spillover on China's carbon productivity," Energy Policy, Elsevier, vol. 145(C).
    4. Ling Feng & Lulan Ge & Zhiyuan Li & Ching‐Yi Lin, 2022. "Financial development and natural resources: The dynamics of China’s outward FDI," The World Economy, Wiley Blackwell, vol. 45(3), pages 739-762, March.
    5. Hongxing Cao & Huirong Zhan & Yuan Wang & Ziyao Wei, 2021. "Sino-Bulgarian Economic Relations in the Post Pandemic World," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 177-196, July.

    More about this item

    Keywords

    China; outward foreign direct investment (OFDI); emerging and developing countries; globalization;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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