TITLE:
Economic Governance Quality and Chinese OFDI: Evidence from the “Belt and Road” Countries
AUTHORS:
Suhang Xu, Liyan Liu
KEYWORDS:
Insert Economic Governance, Chinese OFDI, the “Belt and Road”
JOURNAL NAME:
Modern Economy,
Vol.13 No.1,
January
6,
2022
ABSTRACT: China’s foreign direct investment in 54 countries along
the “Belt and Road” from year 2003 to year 2019 are adopted as sample data, and
economic system indicators such as business freedom, currency freedom, trade
freedom, investment freedom, and fiscal freedom are introduced as the proxy
variable for the quality of host-country’s economic governance, to analyze the
impact of different economic governance levels of countries along the route on
China’s foreign direct investment. Due to the missing data and the non-random characteristics of China’s investment in sample
countries, the Heckman two-step model is adopted to solve the issue of
self-selection bias, and policy impact of the “Belt and Road” initiative is
introduced to explore the quality of economic governance of the countries along
the route on China’s foreign direct investment.
The findings show that, 1) China is more inclined to invest in host countries with a large market, and its investment preference is market-seeking;
2) the host-country labor freedom and financial freedom have a positive impact
on Chinese direct investment, while trade freedom and investment freedom
negatively affects Chinese investment; 3) the implementation of the “Belt and
Road” initiative has affected the mechanism of host-country’s economic
governance on China’s foreign direct investment.