The Misunderstanding of China’s Investment, and a Clarification: “Faustian Bargain” or “Good Bargain”? On the OFDI Data of Central and Eastern Europe

Cheche Duan, Yicheng Zhou, Dehong Shen, Shengqiao Lin, Wei Gong, József Popp and Judit Oláh
Additional contact information
Cheche Duan: School of Government, Shenzhen University, Shenzhen 215123, China
Yicheng Zhou: Institute on the Development of Southern Jiangsu, Collaborative Innovation Center for New-Type Urbanization and Social Governance of Jiangsu Province, Soochow University, Suzhou 215123, China
Dehong Shen: Metropolitan College, Boston University, Boston, MA 02215, USA
Shengqiao Lin: Department of Government, University of Texas at Austin, Austin, TX 78703, USA
Wei Gong: Zhejiang Business College, Hangzhou 310000, China
József Popp: Institute of Economic Sciences, Hungarian University of Agriculture and Life Sciences, 2100 Gödöllő, Hungary
Judit Oláh: Faculty of Economics and Business, University of Debrecen, 4032 Debrecen, Hungary

Sustainability, 2021, vol. 13, issue 18, 1-25

Abstract: The close development of the economic relations between China and Central and Eastern Europe (CEE) since 2012 has triggered the European Union’s criticism of China’s foreign policy towards Eastern European countries. The European Union believes that China’s investment growth has led to a governance crisis in CEE countries. Based on the global governance indicators of the World Bank and the outward foreign direct investment (OFDI) data of the Ministry of Commerce of China, this paper conducts a test using the panel data model and the regression discontinuity method. An imbalanced panel dataset is adopted, covering 16 CEE countries from 2000 to 2018. The empirical research results indicate that, representing a small proportion of the investment inflows to CEE countries, China is not yet able to exert a domination effect on the region, and China’s economic power is far less than the European Union’s regulatory influence. Furthermore, China’s share of the OFDI in CEE has a U-shaped effect on the regulatory quality of host countries, and the two have a mutually causal relationship. Specifically, the impact on the host country’s regulatory quality is first manifested in the Shanghai effect, and when China’s share reaches a certain level, it is manifested in the California effect. The U-shaped effect is associated with the strategic factors of CEE countries and China’s positive contribution to good global governance.

Keywords: governance quality; China’s OFDI; 16 + 1 cooperation framework; Central and Eastern Europe; the Belt and Road Initiative (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/13/18/10281/pdf (application/pdf)
https://www.mdpi.com/2071-1050/13/18/10281/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:18:p:10281-:d:635587

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().