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Does the Quality of Institutions in Host Countries Affect the Location Choice of Chinese OFDI: Evidence from Asia and Africa

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  • Muhammad Abdul Kamal
  • Syed Hasanat Shah
  • Wang Jing
  • Hafsa Hasnat

Abstract

This article investigates the interactive effect of institutional quality and natural resources (divided into fuel and nonfuel resources) on the flows of Chinese outbound foreign direct investment (OFDI) in host countries in Asia and Africa. The findings of the article indicate that institutional quality in host countries affect the flow of Chinese OFDI but only in nonfuel natural resource–rich countries while institutions in fuel resource–rich countries play a insignificant role in the flow of Chinese OFDI. This shows that quality of institutions is a significant determinant of Chinese OFDI in countries where institutions matter while Chinese OFDI overlooks and surpasses institutions in fuel resource–rich countries. The significant interactive effect of institutions and nonfuel resources in this article suggests that Chinese OFDI is not insensitive to quality of institutions but it depends on the sector, risk level, and domestic imperatives.

Suggested Citation

  • Muhammad Abdul Kamal & Syed Hasanat Shah & Wang Jing & Hafsa Hasnat, 2020. "Does the Quality of Institutions in Host Countries Affect the Location Choice of Chinese OFDI: Evidence from Asia and Africa," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(1), pages 208-227, January.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:1:p:208-227
    DOI: 10.1080/1540496X.2019.1610876
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    Cited by:

    1. Razzaq, Asif & An, Hui & Delpachitra, Sarath, 2021. "Does technology gap increase FDI spillovers on productivity growth? Evidence from Chinese outward FDI in Belt and Road host countries," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    2. Zhouzhou Lin & Dezhi Liang & Shengnan Li, 2022. "Environmental Regulation and Green Technology Innovation: Evidence from China’s Heavily Polluting Companies," Sustainability, MDPI, vol. 14(19), pages 1-18, September.
    3. Samira Ben Belgacem & Moheddine Younsi & Marwa Bechtini & Abad Alzuman & Rabeh Khalfaoui, 2024. "Do Financial Development, Institutional Quality and Natural Resources Matter the Outward FDI of G7 Countries? A Panel Gravity Model Approach," Sustainability, MDPI, vol. 16(6), pages 1-24, March.
    4. Yasmeen, Rizwana & Zhaohui, Cui & Hassan Shah, Wasi Ul & Kamal, Muhammad Abdul & Khan, Anwar, 2022. "Exploring the role of biomass energy consumption, ecological footprint through FDI and technological innovation in B&R economies: A simultaneous equation approach," Energy, Elsevier, vol. 244(PA).
    5. Munmi Saikia, 2022. "Good institutions, more FDI? Evidence from Indian firm-level data," International Economics and Economic Policy, Springer, vol. 19(3), pages 411-436, July.
    6. Hui Wang & Xin Zhong, 2023. "An Empirical Study on the Impact of Chinese OFDI on the Global Value Chain Positions of Countries Along the Belt and Road and Threshold Effects," SAGE Open, , vol. 13(1), pages 21582440231, February.
    7. Ismaila Adeleye Okunoye & Emeka O. Akpa & Bamidele Boluwatife & Maxwell Jimmy, 2023. "Does Global Economic Uncertainty Affect Foreign Direct Investment? Evidence From Asian Emerging Markets," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 4(2), pages 1-4.
    8. Li, Xin & Tong, Yan & Zhong, Kai & Xu, Guoquan & Zhao, Wenyi, 2024. "Geopolitical risk and foreign subsidiary performance of emerging market multinationals," Journal of Multinational Financial Management, Elsevier, vol. 72(C).
    9. Wang, Xiaoying & Anwar, Sajid, 2022. "Institutional distance and China's horizontal outward foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 1-22.
    10. Syed Hasanat Shah & Waqar Ameer, 2021. "The impact of outbound foreign direct investment on export and private investment: Comparative analysis of emerging and developed countries," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 674-692, December.
    11. Parfait Bihkongnyuy Beri & Gabila Fohtung Nubong, 2021. "Impact of bilateral investment treaties on foreign direct investment in Africa," African Development Review, African Development Bank, vol. 33(3), pages 439-451, September.
    12. Muhammad Farhan Bashir & Benjiang MA & Luqman Shahzad & Biao Liu & Qiangjia Ruan, 2021. "China's quest for economic dominance and energy consumption: Can Asian economies provide natural resources for the success of One Belt One Road?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 570-587, April.
    13. Bashir Muhammad & Muhammad Kamran Khan, 2023. "Do Institutional Quality and Natural Resources Affect the Outward Foreign Direct Investment of G7 Countries?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 116-137, March.
    14. Zhao, Yanping & Chen, Qing & de Haan, Jakob, 2023. "Does central bank independence matter for the location choices of Chinese firms’ foreign investments?," International Business Review, Elsevier, vol. 32(4).
    15. Davidmac O. Ekeocha & Jonathan E. Ogbuabor & Patterson C. Ekeocha & Anthony Orji, 2023. "Analysis of Sectoral Outcomes and Institutional Quality Nexus in Sub-Saharan Africa," SAGE Open, , vol. 13(4), pages 21582440231, October.

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