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Can Existing Theories Explain China’s Outward Foreign Direct Investment in Belt and Road Countries

Le Chang (), Jing Li (), Kee-Cheok Cheong () and Lim Thye Goh ()
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Le Chang: Faculty of Economics and Administration, University of Malaya, Kuala Lumpur 50603, Malaysia
Jing Li: Fashion Department of International United Faculty between Ningbo University and University of Angers/Faculty of Geography Science and Tourism Culture, Ningbo University, Ningbo 315201, China
Kee-Cheok Cheong: Faculty of Economics and Administration, University of Malaya, Kuala Lumpur 50603, Malaysia

Sustainability, 2021, vol. 13, issue 3, 1-17

Abstract: This study examines the extent to which existing foreign direct investment (FDI) theories apply to Chinese investment in the Belt and Road Initiative (BRI) countries. This is important because existing explanations of Chinese outward FDI (OFDI) generally make scant reference to these theories. By using OFDI data for BRI countries between 2003 and 2017, we tested hypothesizes applicable to existing theories by using both pooled ordinary least squares (PLOS) and stochastic frontier analysis (SFA) methods. The results show that a large part of the existing theories apply to Chinese OFDI. Chinese OFDI is likely to choose countries with big market size, abundant natural resources, cheap unskilled labor, stable politics, good infrastructure, high trade cost and high investment cost. These positive findings notwithstanding, they do not invalidate the alternative factors cited by commentators which have not been subject to direct testing, which may require the use of qualitative analytical approaches.

Keywords: Chinese OFDI; FDI theory; BRI; Chinese multinational firms (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2021
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