Chinese State’s Economic Cooperation Related Investment: An Investigation of its Direction and Some Implications for Outward Investment
Sumon K. Bhaumik
Aston University, Aston Business School; Institute for the Study of Labor (IZA); University of Michigan at Ann Arbor - Stephen M. Ross School of Business, William Davidson Institute
Catherine Y. Co
University of Nebraska at Omaha - Department of Economics
August 16, 2009
William Davidson Institute Working Paper No. 966
The Chinese state undertakes large scale investments in a number of countries under the auspices of economic cooperation related investment (ECI). While there are suggestions that it is an extension of China's soft power aimed at facilitating Chinese FDI in those countries, often for access to natural resources, there is no systematic analysis of this in the literature. In this paper, we examine this investment of the Chinese state over time. Our results suggest that the pattern of investment is indeed explained well by factors that are used in the stylised literature to explain directional patterns of outward FDI. They also demonstrate that the (positive) relationship between Chinese ECI and the recipient countries' natural resource richness is not economically meaningful. Finally, while there is some support for the popular wisdom that China's willingness to do business with a country is not strongly affected by its level of corruption, there is much weaker support, if any, for the hypotheses that China favours doing business with countries where political rights are limited.
Number of Pages in PDF File: 31
Keywords: China, Economic cooperation related investment, Foreign direct investment, Natural resources, Institutional quality
JEL Classification: F21, F23, F59working papers series
Date posted: October 17, 2009
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