Macroeconomic Prospects for China's Outward FDI

Ilan Alon; Tanya Molodtsova; Jian Zhang

doi:10.1080/19186444.2012.11658324

Macroeconomic Prospects for China's Outward FDI

Ilan Alon, Tanya Molodtsova, Jian Zhang

Research output: Contribution to journal › Article › peer-review

6 Scopus citations

Abstract

We present evidence from panel data on overseas foreign direct investment (OFDI) by Chinese firms in 103 countries during 2003–2007. The data suggest that Chinese imports, unlike Chinese exports, stimulate investment in the country of origin. This article supports the theory that Chinese investment abroad is horizontal and designed to serve the Chinese local market (import platform investment). Estimates suggest that a 1% change in imports from China will lead to a 0.15% change in Chinese OFDI. We also find that an appreciation of the Chinese exchange rate will have a strong influence on firm entry decisions.

Original language	English
Pages (from-to)	16-40
Number of pages	25
Journal	Transnational Corporations Review
Volume	4
Issue number	2
DOIs	https://doi.org/10.1080/19186444.2012.11658324
State	Published - 1 Jun 2012
Externally published	Yes

Keywords

China
OFDI
exchange rate
gravity model
international trade

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10.1080/19186444.2012.11658324

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title = "Macroeconomic Prospects for China's Outward FDI",

abstract = "We present evidence from panel data on overseas foreign direct investment (OFDI) by Chinese firms in 103 countries during 2003–2007. The data suggest that Chinese imports, unlike Chinese exports, stimulate investment in the country of origin. This article supports the theory that Chinese investment abroad is horizontal and designed to serve the Chinese local market (import platform investment). Estimates suggest that a 1% change in imports from China will lead to a 0.15% change in Chinese OFDI. We also find that an appreciation of the Chinese exchange rate will have a strong influence on firm entry decisions.",

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AU - Molodtsova, Tanya

AU - Zhang, Jian

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N2 - We present evidence from panel data on overseas foreign direct investment (OFDI) by Chinese firms in 103 countries during 2003–2007. The data suggest that Chinese imports, unlike Chinese exports, stimulate investment in the country of origin. This article supports the theory that Chinese investment abroad is horizontal and designed to serve the Chinese local market (import platform investment). Estimates suggest that a 1% change in imports from China will lead to a 0.15% change in Chinese OFDI. We also find that an appreciation of the Chinese exchange rate will have a strong influence on firm entry decisions.

AB - We present evidence from panel data on overseas foreign direct investment (OFDI) by Chinese firms in 103 countries during 2003–2007. The data suggest that Chinese imports, unlike Chinese exports, stimulate investment in the country of origin. This article supports the theory that Chinese investment abroad is horizontal and designed to serve the Chinese local market (import platform investment). Estimates suggest that a 1% change in imports from China will lead to a 0.15% change in Chinese OFDI. We also find that an appreciation of the Chinese exchange rate will have a strong influence on firm entry decisions.

KW - China

KW - OFDI

KW - exchange rate

KW - gravity model

KW - international trade

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Macroeconomic Prospects for China's Outward FDI

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Keywords

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