The impact of Asian Infrastructure Investment Bank on OFDI: evidence from China

ABSTRACT

This study empirically explores the impact of the Asian Infrastructure Investment Bank (AIIB) on outward foreign direct investment (OFDI). Based on data of Chinese cross-border investments during 2007–2020 obtained from the Bureau van Dijk (BvD) Zephyr database, we use a multi-period difference-in-differences estimation strategy to identify the construction of the AIIB throughout the period of 2014–2020. The results reveal that the establishment of the AIIB increases the possibility of China’s OFDI by an average of 15.45%; furthermore, the number of China’s OFDI projects arises by 20.40% and the amount of China’s OFDI flows boosts by 23.04% on average. Moreover, the heterogeneity analyses show that the AIIB prompts more OFDI flows to countries with higher economic developments, especially those technology- and export-oriented ones.

KEYWORDS:

• AIIB
• OFDI
• financing supports
• infrastructure connectivity

JEL CLASSIFICATION:

• D21
• G24
• F21

Acknowledgments

This work was financially supported by Scientific Research Laboratory of Digital Trade in University of International Business and Economics, and Beijing Social Science Foundation (grant 21JJB015). The authors contribute equally to this work and the authors are listed in alphabetical order. All errors are our own.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data that support the findings of this study are available from the Bureau van Dijk (BvD) Zephyr database. Restrictions apply to the availability of these data, which were used under licence for this study. Source link: https://zephyr.bvdinfo.com/

Notes

¹ ‘Golden straitjacket’ is a term defined by Thomas Friedman in the early 20th century, and it refers to a degree of relinquishment of economic sovereignty that developing countries have to sacrifice to global institutions, such as the WB, IMF, and ADB..

² Data source link: https://www.aiib.org/.

³ Data source link: https://www.aiib.org/.

⁴ Specifically, $\mathit{AD}{B}_c$ takes a value of 1 if country c joined the ADB, and 0 otherwise; $\mathit{IBR}{D}_c$ equals to 1 if country c joined the IBRD, and 0 otherwise; $\mathit{BR}{I}_c$ equals to 1 if country c joined the BRI, and otherwise 0. To avoid the dummy characteristics being absorbed by country fixed effects, we add the interaction items between the dummies (i.e. $\mathit{AD}{B}_c$, $\mathit{IBR}{D}_c$, and $\mathit{BR}{I}_c$) and $\mathit{pos}{t}_{\mathit{ct}-1}$ to our regressions.

⁵ Due to the data unavailability of OFDI transaction at firm-country-year level, we collect data from BvD-Zephyr database to measure China’s cross-border investments around the world. Specifically, the database releases firms’ transactions of merger and acquisition, joint venture, venture capital and other cross-border investment deals.

⁶ For instance, based on samples of firms’ merger and acquisition deals obtained from the database, Boateng, Wang, and Yang (2007) and Du (2021) have examined the motivations of Chinese firms’ cross-border investments under the ongoing economic conflict; Chen, Liang, and Wu (2023) use firms’ cross-border deal information released by this database to investigate the impact of Chinese firms’ cross-border merger and acquisition on their corporate social responsibility performance.

Additional information

Funding

Beijing Social Science Foundation (grant 21JJB015).