A double-edged sword: Chinese direct investment in Latin America

Jing Zhou

Structural Change and Economic Dynamics, 2023, vol. 67, issue C, 234-249

Abstract: Under the ‘Belt and Road’ initiative, China has expanded its footprint in Latin America and Caribbean (LAC) and contributed to LAC FDI stock, as well as, gross fixed capital formation and GDP. Based on the firm-level Chinese investment data and GTAP database, this paper uses the computable general equilibrium model to estimate the influences of Chinese direct investment on LAC economies. Chinese ODI and the booming economy are the engines for LAC development, according to its contribution to GDP, and trade balance improvement. The rest of LAC economies, China and US benefit indirectly from Chinese investment as well. Each country gives its full play to its comparative advantages. However, it is cautious that the industries with resource endowments in LAC have expanded largely and squeezed out the production of manufactures, which makes LAC economies more dependent on the growth of Chinese economy.

Keywords: Computable general equilibrium; Overseas direct investment; Infrastructure; Energy; Resource (search for similar items in EconPapers)
JEL-codes: F11 F14 F17 F21 F47 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:67:y:2023:i:c:p:234-249

DOI: 10.1016/j.strueco.2023.07.010

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