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The Impact of Institutions and Exchange Rate Volatility on China’s Outward FDI

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  • Yang Li
  • Erick W. Rengifo

Abstract

Over the past decade, China’s outward foreign direct investment (OFDI) has rapidly increased. However, its characteristics are not sufficiently studied. In this article, we explore the host country’s determinants of China’s OFDI, with a focus on institutional quality, exchange rate volatility, and natural resources by performing an econometric analysis for the period 2003–2013 for a sample of 49 countries. Our results reveal that China’s OFDI is invested in countries with relatively poor institutional quality and abundant natural resources. Exchange rate variability has a dampening effect on China’s OFDI and that the appreciation of the Chinese renminbi enhances OFDI flows.

Suggested Citation

  • Yang Li & Erick W. Rengifo, 2018. "The Impact of Institutions and Exchange Rate Volatility on China’s Outward FDI," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(12), pages 2778-2798, September.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:12:p:2778-2798
    DOI: 10.1080/1540496X.2017.1412302
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