Explaining Chinese SOEs’ risk tolerance in the developing world: Evidence from Chinese hydropower investment in Cambodia

Youyi Zhang

World Development Perspectives, 2022, vol. 28, issue C

Abstract: In recent years Chinese state-owned enterprises (SOEs) have become a major source of development finance in the developing world. Although some Chinese SOEs are risk averse, others endure high risk as a result of public backlash from projects they conduct in host states. Why are some Chinese SOEs more risk tolerant than others when engaging in investment projects in the developing world? In order to explain this variation, the author explores the domestic political economy underlying Chinese SOEs’ overseas investment decision-making, arguing that SOEs with increasing overseas market share are less likely to pursue risky projects, acting as responsible stakeholders in developing countries. To illustrate this hypothesis, the author investigates Chinese-financed hydropower projects in Cambodia, drawing upon original research records gathered in China and Cambodia between 2017 and 2020. Comparative case studies yield the following findings: First, SOEs with increasing market share are less likely to engage in hydropower projects with significant environmental and ecological impact; second, SOEs are less likely to take on risky projects with financing from Chinese policy banks. This article indicates that variation among Chinese SOEs will ultimately result in diverse outcomes for and reactions to Chinese state-sponsored infrastructure projects in the developing world. It also sheds light on the need for more effective regulation from the Chinese government to ensure Chinese SOEs’ responsible overseas investment.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:wodepe:v:28:y:2022:i:c:s2452292922000613

DOI: 10.1016/j.wdp.2022.100453

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