New paper co-authored by Xiaolan Fu examines growth impact of Chinese outward foreign direct investment

Posted:
15 April, 2020

A new paper co-authored by Professor Xiaolan Fu with Peter J Buckley of the University of Leeds and Xiaoqing Maggie Fu of the University of Macau examines the growth impact of Chinese outward foreign direct investment (OFDI) on host developing countries and investigates whether it is different from that of OFDI from Western countries.

The analysis covers the distinctive characteristics of Chinese OFDI, in particular, weak ownership advantages and strong state supportiveness, and how they influence the growth impact of OFDI through different transmission channels.

Using a cross-country panel dataset for 52 countries over the 2004-12 period and OFDI originating from China and the US as examples, the results suggest it is not absolute but relative ownership advantage and the gap-filling compatibilities between FDI and host economies that determine the growth impact of FDI on the host countries.

They find that both Chinese OFDI and US OFDI have a significant positive impact on capital accumulation in developing countries; however, Chinese OFDI has a stronger effect on employment and productivity growth than US OFDI. Moreover, the growth impact of Chinese OFDI is stronger in low-income countries, while US OFDI demonstrates significant effects mainly in middle-income countries.

Xiaolan Fu, Peter J Buckley and Xiaoqing Maggie Fu (2020) 'The Growth Impact of Chinese Direct Investment on Host Developing Countries', International Business Review, DOI: 10.1016/j.ibusrev.2019.101658