Does institutional difference affect Chinese outward foreign direct investment? Evidence from fuel and non-fuel natural resources

Abstract

This article investigates the impact of institutional difference and natural resource endowment in developing host countries on the location choice of Chinese OFDI. We found that institutional difference between China and host countries insignificantly affect the flow of Chinese OFDI, however, when observed on sectoral levels; Chinese investment is responsive to the institutional difference in non-fuel natural resource rich countries while institutional difference asserts insignificant influence on Chinese OFDI in fuel resource rich countries. This shows that institutions play a role in the location choice of Chinese OFDI but, it depends on the sector and institutional proximity.

Keywords:

• Chinese OFDI
• institutions difference
• fuel resources
• non-fuel resources
• developing countries
• panel data

JEL classification:

• E02
• N5

Notes

Acknowledgments

We are thankful to the editor and the reviewers of Journal of the Asia Pacific Economy for critical review and comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Such as growing Chinese investment in Afghanistan.

2 Global Investment Competitiveness Report 2017/2018.

3 It is observed that FDI can produce different results at sectoral and aggregate level (Shah et al. 2019).

Additional information

Funding

This project is supported by National Social Science China (主持国家社科基金专项重大项目18VSJ085) and by Jilin University (Project No. 801171100531).

Notes on contributors

Syed Hasanat Shah

Dr. Syed Hasanat Shah is currently working as an associate professor in the School of Economics in Jilin University China. He also worked for the Central Bank of Pakistan. Shah’s main area of interest is FDI, institutions and entrepreneurship. He published in journals such as Applied Economics and Energy Policy.

Muhammad Abdul Kamal

Dr. Muhammad Abdul Kamal is working as assistant professor in Economics Department in Abdul Wali Khan University, Mardan, Pakistan. Postdoctoral research fellow, School of Economics, Henan University, China.

Hafsa Hasnat

Hafsa Hasnat is Ph.D. in world economy and currently working as post doc fellow in the School of business in Jilin University, China. She focuses on BRI and CPEC, especially the infrastructure and entrepreneurship in these countries. She published in papers such as Asian Politics and Policy.

Li Jun Jiang

Dr. Li Jun Jiang remained the dean of the School of Economics at Jilin University. He published books on international economics and world economy and research papers on FDI in Brazilian Journal of Business and Economics.