China’s Outward Foreign Direct Investment Along “Belt and Road Initiative”

Year 2018, Volume: 4 Issue: 1, 89 - 105, 10.04.2018

Sedat Aybar Meryem Gürel

Abstract

This article examines the motivations and determinants of China’s

Outward Foreign Direct Investment (OFDI) within the new lands called

The Belt and Road Initiative (BRI) inspired by the ancient Silk Road.

Although China’s OFDI has always been important for academic interest,

OFDI along the BRI is a distinctive economic policy for China at the

global stage. The existing literature demonstrates that China’s OFDI

with its economic policy is based on its national modernization. As

China’s multivariate domestic economy requires different strategies with

diversified outward investments along the BRI and non-BRI countries, it

has positive return to the country. The investigation hereby indicates that

China’s OFDI has different motivations for natural resources, strategic

assets, market and efficiency seeking. Its determinants are cost advantage,

institutions, market size, national agglomeration, cultural proximity, free

trade agreement (FTA) expanding trade relations and qualified labor in

low-income and middle-income countries. The transfer of CO2 emissions

requiring industrial selection is also a driver of China’s OFDI aiming the

reduction of air pollution for climate change. Besides the efforts of China,

the state-owned enterprises need reforms to broaden ownership for further

outward investments as an implication.

Keywords

China, OFDI, Belt and Road Initiative, Chinese SOES

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