The effect of political risk on China’s foreign direct investment

Figures & data

Table 1. Variables and data sources

Variable Types	Variable notation	Meaning of variables	Data sources
Dependent variables	Lnstock	Logarithm of OFDI stock in each country	World Bank
	Lngross	Logarithm of China’s OFDI stock	China Overseas Direct Investment Announcement
Political risk variables	Expro	Lack of expropriation risk	ICRG
	Gove	Government Efficiency	ICRG
	Govs	Government Stability	ICRG
	Pac	Degree of democracy	ICRG
	Cona	Absence of conflict	ICRG
Market-seeking variables	Lngdp	Logarithm of the host country’s GDP	World Bank
	Lnpop	Logarithm of the host country population	World Bank
	Lnpgdp	Logarithm of host country GDP per capita	World Bank
Resource-seeking variables	res1	Natural resource rents as a share of GDP by country	World Bank
	res2	Crude oil and metals exports by country as a share of total exports	World Bank
Tech-seeking variables	Rde	Investment in R&D as a share of GDP by country	World Bank
	Rd	Number of research and technical staff in each country	World Bank
Control variables	L.lnstock	Lagged period of OFDI stock in each country	World Bank
	L.lngross	Lagged period of China’s FDI stock	World Bank
	Growth	GDP growth rate of each country	World Bank
	Lntrade	Country’s total trade with other countries	UN Commodity Cargo Database

Table 2. Descriptive statistics of variables

Variable	Obs	Mean	Std.Dev.	Min	Max
Lnstock	1888	11.25	0.978	6.152	12.81
Lngross	1734	7.854	1.207	4	11.57
Expro	1943	2.349	0.778	0.500	4
Gove	1957	2.314	1.062	0.500	5
Govs	1984	5.575	2.624	0	17
Pac	1957	4.127	1.048	0.855	6
Cona	1957	9.582	1.323	3.775	11.75
Lngdp	1881	10.812	0.858	8.649	13.87
Lnpgdp	1881	3.272	0.678	2.077	5.778
Lnpop	1932	7.097	0.688	5.373	9.184
Growth	1878	0.044	0.057	−0.611	1.737
Lntrade	1886	9.417	0.975	4.841	11.783
res1	1876	0.098	0.145	0	0.641
res2	1783	0.243	0.300	0.000456	0.978
Rde	967	1.094	0.951	0.00827	4.455

Table 3. Regression results for impact of political risk on OFDI of countries around the world

Variables	Mode 1	Model 2	Model 3	Model 4
L.lnstock	0.871***	0.870***	0.872***	0.974***
	(18.38)	(17.98)	(19.01)	(215.6)
Expro	0.018**	0.024***	0.022***	0.018***
	(2.87)	(3.01)	(2.67)	(3.67)
Gove	−0.007	−0.009	−0.007	−0.013***
	(−0.83)	(−1.05)	(−0.90)	(−2.86)
Govs	0.001	0.001	−0.003	0.003
	(0.15)	(−0.33)	(−0.83)	(1.27)
Pac	0.012	0.006	0.009	−0.001
	(1.09)	(0.57)	(1.20)	(−0.18)
Cona	0.009**	0.008	0.001	0.007**
	(2.01)	(1.74)	(0.08)	(2.27)
Lngdp	−0.764	−0.741	−0.753	−0.519***
	(−1.61)	(−1.52)	(−1.61)	(−2.64)
Lnpgdp	0.852*	0.812*	0.841*	0.544***
	(1.71)	(1.62)	(1.75)	(2.75)
Lnpop	0.841*	0.817*	0.843*	0.554***
	(1.72)	(1.63)	(1.76)	(2.80)
Growth	0.09	0.094	0.072	0.117**
	(1.47)	(0.67)	(1.38)	(2.48)
Constant	0.163	0.202*	0.094	0.078
	(1.44)	(1.84)	(0.88)	(1.43)
Country effect	Yes	Yes	Yes	Yes
Year effect	Yes	Yes	Yes	Yes
Obs	1603.000	1603.000	1603.000	1603.000
F-test	1688.774	1970.791	1971.016	12,056.69
AR (1)	0.000	0.000	0.000
AR (2)	0.371	0.377	0.371
R-squared				0.987

Note: Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1. Variable definitions and measurements are explained in Table 1.

Table 4. Empirical results of political risk preferences of China for OFDI

Variables	Model 1	Model 2	Model 3	Model 4
L.lngross	0.857***	0.876***	0.834***	0.840***
	(32.02)	(41.26)	(43.62)	(34.26)
Expro	−0.042***	−0.035**	−0.014	−0.034***
	(−2.32)	(−2.42)	(−1.30)	(−3.68)
Gove	0.023	0.021**	0.043*	0.063***
	(1.43)	(2.41)	(1.65)	(3.39)
Govs	0.001	0.001	0.004	0.004
	(1.03)	(1.09)	(0.66)	(1.19)
Pac	−0.023**	−0.022	−0.035	−0.028
	(−2.32)	(−1.38)	(−1.29)	(−1.33)
Cona	0.027*	0.029*	0.028*	0.027*
	(1.64)	(1.79)	(1.71)	(1.76)
Lngdp	0.948	0.905	0.754	0.915
	(1.42)	(1.12)	(0.97)	(1.54)
Lnpgdp	−0.659	−0.937	−0.768	−0.856*
	(−1.33)	(−1.33)	(−0.66)	(−1.16)
Lnpop	−0.946	−0.731	−0.579	−0.769
	(−1.25)	(−1.12)	(−0.77)	(−1.66)
Growth	0.021	0.271*	0.242	0.275*
	(0.49)	(1.63)	(1.57)	(1.42)
Lntrade	0.082	0.030	0.034	0.034***
	(1.67)	(1.05)	(0.89)	(3.52)
res1		0.327***	0.354***	0.343***
		(3.32)	(3.46)	(4.33)
Constant	0.179	0.028	−0.161	0.093
	(1.23)	(0.54)	(−0.62)	(0.26)
Country effect	Yes	Yes	Yes	Yes
Time effect	Yes	Yes	Yes	Yes
Obs	1503.000	1498.000	1498.000	1498.000
F-test	984.530	1173.861	1119.916	1558.335
AR (1)	0.000	0.000	0.000
AR (2)	0.632	0.634	0.624
R-squared				0.926

Note: Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1. Variable definitions and measurements are explained in Table 1.

Table 5. Estimation results of the sub-sample of China’s political risk preference for OFDI

Variables	Developed Countries	Emerging Market Countries	Other developing countries
L.lngross	0.744***	0.724***	0.775***
	(24.03)	(5.05)	(21.58)
Expro	−0.132	−0.128**	−0.052**
	(−1.21)	(−2.30)	(−2.32)
Gove	−0.002	−0.035	0.032*
	(−0.20)	(−0.83)	(1.70)
Govs	0.001	−0.001	0.002
	(0.21)	(−0.29)	(0.49)
Pac	−0.039	0.000	−0.003
	(−0.91)	(−0.00)	(−0.73)
Cona	0.001	0.023	0.010
	(0.02)	(0.70)	(1.31)
Lngdp	−0.131*	0.748	0.104**
	(−1.68)	(0.13)	(2.52)
Lnpgdp	0.761***	−0.542	−0.254***
	(3.41)	(−0.35)	(−3.54)
Lnpop		−0.843	0.143
		(−0.23)	(0.74)
Growth	0.762	0.745*	0.032
	(0.64)	(2.00)	(0.65)
Lntrade	0.320***	0.132*	0.372***
	(3.24)	(1.57)	(3.23)
res1		0.420***	0.850***
		(4.30)	(18.48)
Rde	−0.037
	(−1.32)
Constant	−3.773***	0.267	−0.042
	(−3.24)	(0.52)	(−0.30)
Country effect	Yes	Yes	Yes
Time effect	Yes	Yes	Yes
Obs	246.000	260.000	942.000
F-test	719.699	2008.974	768.505
AR (1)	0.005	0.016	0.000
AR (2)	0.377	0.590	0.180

Note: Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1. Variable definitions and measurements are explained in Table 1.

Table 6. Empirical results of China’s political risk preference for OFDI in African countries

Variables	Model1	Model2
L.lngross	0.643***	0.612***
	(9.34)	(8.33)
Expro	−0.056**	−0.059**
	(−2.28)	(−2.41)
Gove	0.056*	0.045*
	(1.69)	(1.79)
Govs	0.032***	0.043***
	(2.72)	(2.68)
Pac	0.061**	0.074***
	(−2.47)	(−2.73)
Cona	0.241	0.267
	(1.40)	(1.39)
Lngdp	−0.263	−0.253
	(−0.63)	(−0.74)
Lnpgdp	0.652	0.634
	(0.65)	(0.63)
Lnpop	0.887	0.865
	(1.05)	(1.38)
Growth	0.270	0.153
	(0.65)	(0.42)
Lntrade	0.181***	0.070***
	(3.71)	(3.53)
Constant	0.432	0.342
	(1.22)	(1.32)
Country effect	Yes	Yes
Time effect	Yes	Yes
Obs	453.000	358.000
F-test	1218.669	1386.210
AR (1)	0.001	0.001
AR (2)	0.451	0.560

Note: Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1. Variable definitions and measurements are explained in Table 1.

Table 7. Estimation results of the mixed regression model

Variable	Developed Countries	Emerging Market Countries	Other developing countries	Countries along the “One Belt, One Road”
L.lngross	0.741***	0.763***	0.846***	0.783***
	(23.70)	(24.03)	(32.73)	(23.99)
Expro	−0.050	−0.065**	−0.063***	−0.074***
	(−0.62)	(−2.71)	(−3.42)	(−2.63)
Gove	0.002	−0.053*	0.045	0.039
	(0.04)	(−1.93)	(2.38)	(0.52)
Govs	−0.023	−0.021	0.018	0.015
	(−0.45)	(−1.20)	(0.32)	(1.37)
Pac	−0.006	−0.007	−0.013	−0.034***
	(−0.46)	(−0.26)	(−0.78)	(−2.43)
Cona	0.001	0.051	0.016	0.047*
	(0.01)	(1.74)	(1.43)	(1.87)
Lngdp	−0.535	5.724	0.067**	−0.436
	(−1.56)	(0.45)	(2.11)	(−0.63)
Lnpgdp	0.720***	−5.350	−0.164***	0.565
	(2.96)	(−0.87)	(−4.65)	(0.49)
Lnpop		−5.471		0.598
		(−0.65)		(0.76)
Growth	0.320	0.760	0.225	0.138
	(0.39)	(1.55)	(1.16)	(0.56)
Lntrade	0.457***	0.198***	0.564***	0.291***
	(3.47)	(3.72)	(3.64)	(3.40)
Res		0.304*	0.346***	0.105**
		(1.78)	(3.74)	(2.35)
Rde	0.000
	(−0.77)
Constant	−3.521**	0.079	0.093	−0.650*
	(−2.53)	(0.23)	(0.35)	(−1.86)
Country effect	Yes	Yes	Yes	Yes
Time effect	Yes	Yes	Yes	Yes
Obs	264.000	260.000	942.000	518.000
F-test	126.631	472.935	851.472	643.709
R-squared	0.943	0.922	0.935	0.932

Note: Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1. Variable definitions and measurements are explained in Table 1.

Table 8. Estimation results of replacing independent variables

Variable	Developed Countries	Emerging Market Countries	Other developing countries	Countries along the “One Belt, One Road”
L.lngross	0.752***	0.753***	0.843***	0.797***
	(18.47)	(16.49)	(24.16)	(20.02)
Expro	−0.014	−0.021	−0.028*	−0.018***
	(−0.40)	(−1.43)	(−1.72)	(−2.82)
Gove	0.005	−0.008	0.003	0.012
	(0.36)	(−0.47)	(0.35)	(0.42)
Govs	−0.021	0.001	0.001	0.004
	(−1.43)	(0.30)	(0.32)	(1.21)
Pac	−0.034	−0.024	−0.016	−0.026**
	(−0.79)	(−0.35)	(−0.24)	(−2.28)
Cona	−0.012	0.021	0.029	0.049
	(−0.06)	(0.34)	(1.30)	(1.86)
Lngdp	−0.181**	1.427	0.145**	−0.456
	(−2.73)	(0.36)	(2.62)	(−1.43)
Lnpgdp	0.976***	−1.346	−0.125***	0.764
	(3.70)	(0.25)	(−3.331)	(1.43)
Lnpop		−1.530		0.643
		(−0.36)		(1.42)
Growth	0.634	0.665	0.132	0.143
	(0.83)	(1.43)	(0.71)	(0.68)
Lntrade	0.498***	0.137*	0.042	0.173**
	(3.83)	(1.84)	(0.61)	(2.32)
Res		0.436**	0.367***	0.074
		(2.42)	(3.54)	(1.65)
Rde	−0.062*
	(−2.31)
Constant	−3.321***	0.075	−0.192	−0.783***
	(−3.57)	(0.32)	(−0.56)	(−2.79)
Country effect	Yes	Yes	Yes	Yes
Time effect	Yes	Yes	Yes	Yes
Obs	246.000	246.000	942.000	518.000
F-test	774.419	1086.271	778.186	2022.145
AR (1)	0.004	0.03	0.000	0.004
AR (2)	0.345	0.710	0.162	0.786

Note: Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1. Variable definitions and measurements are explained in Table 1.