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Can China's Diplomatic Partnership Strategy Benefit Outward Foreign Direct Investment?

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  • Churen Sun
  • Yaying Liu

Abstract

In the context of global integration, whether a diplomatic partnership strategy can promote outward foreign direct investment (OFDI) and how it works are very important issues for China. Based on a dataset featuring China's partnerships collected from the Ministry of Foreign Affairs website, we establish an empirical framework to assess the role of China's diplomatic strategy in its OFDI arising from partnerships since 1993. The results show that the establishment or upgrade of partnerships has had a positive effect on Chinese firms’ decisions on OFDI for at least the short term, especially for firms with higher demand for policy guarantees from the government, such as non‐central firms and non‐Beijing firms. The results also show that the increase in OFDI is concentrated in host countries with higher political risks, such as developing countries, neighboring countries, and Belt and Road countries, which is consistent with China's diplomatic focus. Our research proves that China's diplomatic strategy can assist firms to invest abroad.

Suggested Citation

  • Churen Sun & Yaying Liu, 2019. "Can China's Diplomatic Partnership Strategy Benefit Outward Foreign Direct Investment?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(5), pages 108-134, September.
    • Handle: RePEc:bla:chinae:v:27:y:2019:i:5:p:108-134
    DOI: 10.1111/cwe.12289
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    Cited by:

    1. Beibei Hu & Qiao Luan & Xue Meng & Kai Wang, 2023. "Media Inclination and Outward Foreign Direct Investment: Evidence from Chinese Firms," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(6), pages 134-155, November.
    2. Sichong Chen & Wenxue Li & Qi Wang, 2020. "Are Chinese Acquirers Discriminated against in Cross‐border Mergers and Acquisitions? An Analysis Based on Covered Transactions Filed with CFIUS," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(2), pages 37-58, March.
    3. Fangying Pang & Jingjing Tang & Hanwen Xie, 2022. "Investigating whether connecting people can promote subnational economic development: Evidence from China–ASEAN friendship cities," International Studies of Economics, John Wiley & Sons, vol. 17(4), pages 499-530, December.
    4. Huang, Youxing & Yang, Yu, 2023. "Determinants of Chinese energy OFDI location decisions and entry failure risk: The roles of public diplomacy endeavors and firm investment strategies," Energy, Elsevier, vol. 267(C).
    5. Xiaosong Wang & Huan Wu & Le Li, 2022. "Risks and Firms' Decision Making on Outward Foreign Direct Investment: An Empirical Analysis of China's State‐owned Enterprises," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(6), pages 163-182, November.
    6. Youxing Huang & Meixia Dong & Yanping Zhao, 2024. "Sister‐city Ties and Chinese Outward Foreign Direct Investment: A Spatial Econometric Analysis," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 32(1), pages 231-258, January.
    7. Lian, Zeng & Ma, Yunfeng & Chen, Li & He, Rong, 2024. "The role of cities in cross-border mergers and acquisitions — Evidence from China," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1482-1498.
    8. Yu, Donghui & Gu, Baihe & Zhu, Kaiwei & Yang, Jiawen & Sheng, Yuhui, 2024. "Risk analysis of China's renewable energy cooperation with belt and road economies," Energy, Elsevier, vol. 293(C).
    9. Yi, Zhengrong & Sun, Churen, 2022. "Bilateral political relations, space spillovers and the import expansion of China’s bulk commodity," Journal of Asian Economics, Elsevier, vol. 81(C).
    10. Yaying Liu & Jin Chen & Churen Sun, 2022. "Partnership Diplomacy and China’s Exports," Sustainability, MDPI, vol. 14(19), pages 1-22, September.

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