The purpose of this paper is to investigate the major determinants of China’s outward foreign direct investment (OFDI) in the economies along the “Belt & Road” Initiative (BRI afterward). China works on to advance the agenda of the BRI both at home and abroad. The BRI is set up to promote connectivity in five key areas: policy coordination, infrastructure connectivity, trade facilitation, financial cooperation and people-to-people contacts.
The existing literature is inconclusive with regards to the motives, patterns and determinants of the Chinese OFDI. The authors are, therefore, motivated to undertake this study to shed some new light on the influencing factors of the Chinese OFDI. The authors have made a unique data set that consists of China and its 64 partnering countries of the BRI over a time period of 12 years spanning from 2004 to 2015. This time period is chosen on the chief consideration of data availability. The authors have a balanced panel, and applied the gravity model in line with the theoretical arguments and econometric developments.
The paper assumes that China’s OFDI along the BRI was a function of gross domestic product (GDP), income per capita, distance and WTO. The findings showed that GDP, per capita income and distance were the key determinants of the OFDI. China’s entry into the WTO did not strongly affect the OFDI. China maintained a tradition of historical relationships along the BRI economies. After all, China is relocating its investment resources in line with the consideration of its partnering countries’ economic size, cross-border distance and per capita income.
This study is the first of its kinds to analyze the determinants of OFDI by means of gravity model. The authors have covered all the countries along the BRI. Hence, this paper aims to make a substantial contribution to the literature, both from a scientific and a policy perspective.
The authors are grateful to the editor-in-chief and all the anonymous reviewers for commenting on the previous versions of the paper. The first author would like to thank the China Scholarship Council (CSC) for providing financial support. The study was funded by the National Natural Science Foundation of China (Grant Nos. 71673223 and 71473197). The authors are responsible for the contents of the papers and they have no conflict of interest.
Shahriar, S., Kea, S. and Qian, L. (2019), "Determinants of China’s outward foreign direct investment in the Belt & Road economies: A gravity model approach", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-03-2019-0230Download as .RIS
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