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Determinants of China’s outward foreign direct investment in the Belt & Road economies

Author

Listed:
  • Saleh Shahriar
  • Sokvibol Kea
  • Lu Qian

Abstract

Purpose - The purpose of this paper is to investigate the major determinants of China’s outward foreign direct investment (OFDI) in the economies along the “Belt & Road” Initiative (BRI afterward). China works on to advance the agenda of the BRI both at home and abroad. The BRI is set up to promote connectivity in five key areas: policy coordination, infrastructure connectivity, trade facilitation, financial cooperation and people-to-people contacts. Design/methodology/approach - The existing literature is inconclusive with regards to the motives, patterns and determinants of the Chinese OFDI. The authors are, therefore, motivated to undertake this study to shed some new light on the influencing factors of the Chinese OFDI. The authors have made a unique data set that consists of China and its 64 partnering countries of the BRI over a time period of 12 years spanning from 2004 to 2015. This time period is chosen on the chief consideration of data availability. The authors have a balanced panel, and applied the gravity model in line with the theoretical arguments and econometric developments. Findings - The paper assumes that China’s OFDI along the BRI was a function of gross domestic product (GDP), income per capita, distance and WTO. The findings showed that GDP, per capita income and distance were the key determinants of the OFDI. China’s entry into the WTO did not strongly affect the OFDI. China maintained a tradition of historical relationships along the BRI economies. After all, China is relocating its investment resources in line with the consideration of its partnering countries’ economic size, cross-border distance and per capita income. Originality/value - This study is the first of its kinds to analyze the determinants of OFDI by means of gravity model. The authors have covered all the countries along the BRI. Hence, this paper aims to make a substantial contribution to the literature, both from a scientific and a policy perspective.

Suggested Citation

  • Saleh Shahriar & Sokvibol Kea & Lu Qian, 2019. "Determinants of China’s outward foreign direct investment in the Belt & Road economies," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 15(3), pages 427-445, September.
    • Handle: RePEc:eme:ijoemp:ijoem-03-2019-0230
    DOI: 10.1108/IJOEM-03-2019-0230
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    Citations

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    Cited by:

    1. Zhai, Wei, 2023. "Risk assessment of China's foreign direct investment in "One Belt, One Road": Taking the green finance as a research perspective," Socio-Economic Planning Sciences, Elsevier, vol. 87(PB).

    More about this item

    Keywords

    China; Gravity model; World Trade Organization (WTO); Outward foreign direct investment (OFDI); The “Belt & Road” Initiative (BRI); F18; F21; F23;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • 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

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