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

Author

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  • Le Chang

    (Faculty of Economics and Administration, University of Malaya, Kuala Lumpur 50603, Malaysia)

  • Jing Li

    (Fashion Department of International United Faculty between Ningbo University and University of Angers/Faculty of Geography Science and Tourism Culture, Ningbo University, Ningbo 315201, China)

  • Kee-Cheok Cheong

    (Faculty of Economics and Administration, University of Malaya, Kuala Lumpur 50603, Malaysia)

  • Lim-Thye Goh

    (Faculty of Economics and Administration, University of Malaya, Kuala Lumpur 50603, Malaysia)

Abstract

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.

Suggested Citation

  • Le Chang & Jing Li & Kee-Cheok Cheong & Lim-Thye Goh, 2021. "Can Existing Theories Explain China’s Outward Foreign Direct Investment in Belt and Road Countries," Sustainability, MDPI, vol. 13(3), pages 1-17, January.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:3:p:1389-:d:489192
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    2. Damoah, Kaku Attah & Giovannetti, Giorgia & Marvasi, Enrico, 2022. "Do country centrality and similarity to China matter in the allocation of belt and road projects?," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 660-674.
    3. Kaku Attah Damoah & Giorgia Giovannetti & Enrico Marvasi, 2023. "Five Stylized Facts on Belt and Road Countries and Their Trade Patterns," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(1), pages 149-181, January.
    4. Anna Visvizi & Miltiadis D. Lytras, 2022. "Belt and Road Initiative in Times of ‘Synchronized Downturn’: Issues, Challenges, and Opportunities," Sustainability, MDPI, vol. 14(3), pages 1-3, January.
    5. Safet Kurtović & Nehat Maxhuni & Blerim Halili & Arta Maxhuni, 2024. "Effect of Host Country Determinants and Institutional Quality on Outward Foreign Direct Investment from Central, Eastern and South-Eastern Europe," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 13272-13308, September.

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