Unravelling the Complex Motivations behind China's FDI
AbstractWe empirically investigate the factors that drive China's outward FDI using dynamic panel methods for 27 countries from 1995 to 2002. Based on the literature review we test three hypotheses: comparative advantages in low wage countries, vertical integration towards resource and human capital abundant countries, and the transaction-enforcing FDI to complement exports. Our results provide strong support for the transaction-enforcing motive: China's FDI follows exports. Next, only in the presence of exports, low income per capita is important arguably because low-income countries have a preference for Chinese low-cost exports. Finally, though this series we find no evidence of FDI to skill-abundant countries and no evidence that host market resources or governance matters.
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Bibliographic InfoPaper provided by Utrecht School of Economics in its series Working Papers with number 09-02.
Length: 20 pages
Date of creation: Feb 2009
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Find related papers by 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
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
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