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Different Motives, Different Outcomes: A Comparative Study of China's Outward FDI in Industrial Parks in Malaysia and Indonesia

Author

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  • Miao Zhang

    (Research School for Southeast Asian Studies Xiamen University, China, Institute of Malaysia Studies Xiamen University, China)

  • Zetao Pang

    (Research School for Southeast Asian Studies Xiamen University, China, Institute of Malaysia Studies Xiamen University, China)

Abstract

Industrial parks have played a central role in China's industrialization and economic growth since its economic reforms. As China expands its outward foreign direct investment (OFDI) abroad, these parks have become a key part of its global strategy. This study uses panel data from 2006 to 2021 and a method called the Synthetic Control Method to examine and compare the economic impact of Chinese OFDI in industrial parks in Malaysia and Indonesia. The findings show a striking difference: Investments in Indonesia's Morowali Industrial Park led to a significant increase in local GDP per capita, while no similar effect was observed in the Malaysia–China Kuantan Industrial Park. Through fieldwork and interviews, the study explores the reasons behind this divergence. In Indonesia, strong economic incentives, supportive government policies, and limited local competition generated positive spillover effects. In Malaysia, however, investments driven more by political consideration faced strong domestic competition and protectionist policies, hence restricting their economic potential. This study highlights the critical role of investment motivations and the interplay between economic and political dynamics in host countries in shaping investment outcomes. It provides valuable lessons for policymakers and investors operating in Southeast Asia's complex landscape.

Suggested Citation

  • Miao Zhang & Zetao Pang, 2025. "Different Motives, Different Outcomes: A Comparative Study of China's Outward FDI in Industrial Parks in Malaysia and Indonesia," Asian Economic Papers, MIT Press, vol. 24(2), pages 129-151, Summer.
    • Handle: RePEc:tpr:asiaec:v:24:y:2025:i:2:p:129-151
    DOI: 10.1162/asep_a_00951
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