Can Existing Theories Explain China’s Outward Foreign Direct Investment in Belt and Road Countries

This study examines the extent to which existing foreign direct investment (FDI) theories apply to Chinese investment in the Belt and Road Initiative (BRI) countries. This is important because existing explanations of Chinese outward FDI (OFDI) generally make scant reference to these theories. By us...

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Bibliographic Details
Published in:Sustainability 2021-02, Vol.13 (3), p.1389
Main Authors: Chang, Le, Li, Jing, Cheong, Kee-Cheok, Goh, Lim-Thye
Format: Article
Language:English
Subjects:
21st century
Competition
Competitive advantage
Costs
Developing countries
Domestic markets
Economic growth
Energy industry
Foreign investment
Hypotheses
Infrastructure
International trade
LDCs
Multinational corporations
Natural resources
Product life cycle
Qualitative analysis
Stochasticity
Sustainability
Xi Jinping
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Summary:This study examines the extent to which existing foreign direct investment (FDI) theories apply to Chinese investment in the Belt and Road Initiative (BRI) countries. This is important because existing explanations of Chinese outward FDI (OFDI) generally make scant reference to these theories. By using OFDI data for BRI countries between 2003 and 2017, we tested hypothesizes applicable to existing theories by using both pooled ordinary least squares (PLOS) and stochastic frontier analysis (SFA) methods. The results show that a large part of the existing theories apply to Chinese OFDI. Chinese OFDI is likely to choose countries with big market size, abundant natural resources, cheap unskilled labor, stable politics, good infrastructure, high trade cost and high investment cost. These positive findings notwithstanding, they do not invalidate the alternative factors cited by commentators which have not been subject to direct testing, which may require the use of qualitative analytical approaches.
ISSN:2071-1050
2071-1050
DOI:10.3390/su13031389