Unravelling the complex motivations behind Chinaâ€™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: Chinaâ€™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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Utrecht School of Economics in its series Working Papers with number 09-02.
Length: 20 pages
Date of creation: 2009
Date of revision:
Contact details of provider:
Postal: P.O. Box 80125, NL-3508 TC Utrecht
Phone: +31 30 253 9800
Fax: +31 30 253 7373
Web page: http://www.uu.nl/EN/faculties/leg/organisation/schools/schoolofeconomicsuse/Pages/default.aspx
More information through EDIRC
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oscar Bajo & Maria Montero Mu–oz, 1999.
"Foreign Direct Investment and Trade: A Causality Analysis,"
Documentos de Trabajo - Lan Gaiak Departamento de EconomÃa - Universidad PÃºblica de Navarra
9902, Departamento de Economía - Universidad Pública de Navarra.
- Oscar Bajo-Rubio & MarÃa Montero-MuÃ±oz, 2001. "Foreign Direct Investment and Trade: A Causality Analysis," Open Economies Review, Springer, vol. 12(3), pages 305-323, July.
- Oscar Bajo & María Montero, . "Foreign direct investment and trade: A causality analysis," Studies on the Spanish Economy 06, FEDEA.
- Markusen, James R & Maskus, Keith E, 2002.
"Discriminating among Alternative Theories of the Multinational Enterprise,"
Review of International Economics,
Wiley Blackwell, vol. 10(4), pages 694-707, November.
- James R. Markusen & Keith E. Maskus, 1999. "Discriminating Among Alternative Theories of the Multinational Enterprise," NBER Working Papers 7164, National Bureau of Economic Research, Inc.
- Ferrantino, Michael J., 1992. "Transaction costs and the expansion of Third-World multinationals," Economics Letters, Elsevier, vol. 38(4), pages 451-456, April.
- Lunn, John, 1980. "Determinants of U.S. direct investment in the E.E.C. : Further evidence," European Economic Review, Elsevier, vol. 13(1), pages 93-101, January.
- Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
- Lecraw, Donald J, 1977. "Direct Investment by Firms from Less Developed Countries," Oxford Economic Papers, Oxford University Press, vol. 29(3), pages 442-57, November.
- Liu, Xiaohui & Buck, Trevor & Shu, Chang, 2005. "Chinese economic development, the next stage: outward FDI?," International Business Review, Elsevier, vol. 14(1), pages 97-115, February.
- Peter J Buckley & L Jeremy Clegg & Adam R Cross & Xin Liu & Hinrich Voss & Ping Zheng, 2007. "The determinants of Chinese outward foreign direct investment," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 499-518, July.
- Blonigen, Bruce A., 2001.
"In search of substitution between foreign production and exports,"
Journal of International Economics,
Elsevier, vol. 53(1), pages 81-104, February.
- Bruce A. Blonigen, 1999. "In Search of Substitution Between Foreign Production and Exports," NBER Working Papers 7154, National Bureau of Economic Research, Inc.
- Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
- James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
- Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August.
- Ju'e Guo, 1996. "Natural Resources and Economic Development in China," Chinese Economy, M.E. Sharpe, Inc., vol. 29(1), pages 5-21, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marina Muilwijk).
If references are entirely missing, you can add them using this form.