Exporting National Champions: China's Outward Foreign Direct Investment Finance in Comparative Perspective

Kevin P. Gallagher and Amos Irwin

China & World Economy, 2014, vol. 22, issue 6, 1-21

Abstract: We examine the extent to which Chinese development banks have financed the globalization of China's “national champion” firms: specifically, through outward foreign direct investment (OFDI). We create a database of Chinese finance for OFDI and compare our results to the existing literature and available data on Japan, Korea and other Asian nations. We estimate the total value of China's OFDI finance from 2002 to 2012 at US$140bn. As a percentage of total OFDI, China's lending is roughly three times higher than Japan's, the previous global leader in OFDI finance. We identify two major reasons for China's high (31 percent) ratio of OFDI lending to total OFDI. First, China has a greater incentive to give OFDI loans than Japan or Korea ever did because its borrowers are state-owned so it can more easily channel funds to targeted areas. Second, China has a greater capacity to give OFDI loans because it has significantly higher savings and foreign exchange reserves than Japan and Korea.

Date: 2014
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