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The nexus between outward foreign direct investment and export sophistication: new evidence from China

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  • Faheem Ur Rehman
  • Yibing Ding

Abstract

This article investigates the bidirectional causal relationship between outbound foreign direct investment (ODI) and export sophistication in China by using autoregressive distributed lag (ARDL) techniques. The findings detect cointegration and bidirectional causal relationship between export sophistication and ODI. The empirical evidence supports that ODI strongly promotes export sophistication and export sophistication weakly encourages Chinese ODI to go out global. The nexus between ODI and export sophistication is good news for China to enhance the quality of exports and catch-up on developed economies. The control variables of trade openness, human capital and quality of institutions improve the strength of cointegration between ODI and export sophistication and play a significant role in promoting the two variables of our interest.

Suggested Citation

  • Faheem Ur Rehman & Yibing Ding, 2020. "The nexus between outward foreign direct investment and export sophistication: new evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 27(5), pages 357-365, March.
    • Handle: RePEc:taf:apeclt:v:27:y:2020:i:5:p:357-365
    DOI: 10.1080/13504851.2019.1616056
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    Citations

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    Cited by:

    1. Rehman, Faheem Ur & Islam, Md. Monirul & Raza, Syed Ali, 2023. "Does disaggregate energy consumption matter to export sophistication and diversification in OECD countries? A robust panel model analysis," Renewable Energy, Elsevier, vol. 206(C), pages 274-284.
    2. 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).
    3. Faheem Ur Rehman & Ejaz Ahmad & Muhammad Asif Khan & József Popp & Judit Oláh, 2021. "Does Trade Related Sectoral Infrastructure Make Chinese Exports More Sophisticated and Diversified?," Sustainability, MDPI, vol. 13(10), pages 1-21, May.
    4. Chen, Wanling & Hu, Yao & Liu, Bei & Wang, Hui & Zheng, Mingbo, 2022. "Does the establishment of Pilot Free Trade Test Zones promote the transformation and upgradation of trade patterns?," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 114-128.
    5. Song Zhang & Chunlai Chen, 2020. "Does Outward Foreign Direct Investment Facilitate China's Export Upgrading?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(5), pages 64-89, September.
    6. Adolfo Maza & Paula Gutiérrez-Portilla, 2022. "Outward FDI and exports relation: A heterogeneous panel approach dealing with cross-sectional dependence," International Economics, CEPII research center, issue 170, pages 174-189.
    7. Qian Feng & Hong Liu & Yuwei Liu & Hengyuan Zhao, 2023. "Selecting a Technological Progress Path and Upgrading Export Product Quality: Evidence From China," SAGE Open, , vol. 13(4), pages 21582440231, November.
    8. Yuxin Lu & Joanna Wolszczak‐Derlacz, 2024. "The Belt and Road Initiative and export variety: 1996–2019," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 38(1), pages 171-203, May.
    9. Tong, Tong & Chen, Xiaoyue & Singh, Tarlok & Li, Bin, 2022. "Corporate governance and the outward foreign direct investment: Firm-level evidence from China," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 962-980.
    10. Jin, Guangzhu & Huang, Zhenhui, 2023. "Asymmetric influence of China's outward FDI and exports on trade-adjusted resources footprint in belt and road node countries: Moderating role of governance," Resources Policy, Elsevier, vol. 82(C).

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