1. Can China’s Diplomatic Partnership Strategy Benefit Outward Foreign Direct Investment?
- Author:
- Churen Sun and Yaying Liu
- Publication Date:
- 12-2019
- Content Type:
- Working Paper
- Abstract:
- In the context of global integration, whether a diplomatic partnership strategy can promote outward foreign direct investment (OFDI) and how it works are very important issues for China. Based on a dataset featuring China’s partnerships collected from the Ministry of Foreign Affairs website, we establish an empirical framework to assess the role of China’s diplomatic strategy in its OFDI arising from partnerships since 1993. The results show that the establishment or upgrade of partnerships has had a positive effect on Chinese firms’ decisions on OFDI for at least the short term, especially for firms with higher demand for policy guarantees from the government, such as noncentral firms and non-Beijing firms. The results also show that the increase in OFDI is concentrated in host countries with higher political risks, such as developing countries, neighboring countries, and Belt and Road countries, which is consistent with China’s diplomatic focus. Our research proves that China’s diplomatic strategy can assist firms to invest abroad.
- Topic:
- Diplomacy, Foreign Direct Investment, Partnerships, Belt and Road Initiative (BRI), Risk, and Economic Diplomacy
- Political Geography:
- China and Asia