Is green always attractive? The location choices of Chinese outward FDI

Andrea Ascani and Simona Iammarino

No 2020-08, Discussion Paper series in Regional Science & Economic Geography from Gran Sasso Science Institute, Social Sciences

Abstract: With the exponential growth of the role of China in the global economy, the environmental implications of its international expansion are serious but still scarcely investigated. This paper analyses the location of 6,494 manufacturing subsidiaries of Chinese Multinational Enterprises (MNEs) in 78 countries over the period 2008-2015, in response to the environmental performance of host economies, in order to explore whether degraded environmental contexts represent a pull factor for Chinese outward foreign direct investment (FDI). We build an original conceptual framework combining traditional race-to-the-bottom arguments with a set of conditioning factors pertaining to heterogeneity of both host countries and MNEs. By empirically accounting for endogeneity concerns, our results suggest that Chinese outward FDI may feed a downward spiral by systematically favouring locations with more fragile ecosystem vitality, that is, a weakly sustainable use of local natural resources and the consequent erosion of the quality of the natural ecosystems. These results characterise Chinese subsidiaries (i) locating in developing countries, (ii) operating within deficient institutional frameworks and (iii) privately owned

Keywords: multinational enterprises; outward FDI; environment; location strategies; China (search for similar items in EconPapers)
JEL-codes: F23 F64 Q5 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-11, Revised 2020-11
New Economics Papers: this item is included in nep-agr, nep-cna, nep-env, nep-hme and nep-int
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