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The dissuasive effect of U.S. political influence on Chinese FDI during the “Going Global” policy era

  • Jing-Lin Duanmu and Francisco Urdinez
Abstract

Building on the growing debate on political determinants of foreign direct investment, we investigate the relationship between U.S. political influence and the global distribution of China's outward foreign direct investment (OFDI). Using country-level and firm-level datasets of China's greenfield investment, we find strong evidence that Chinese state controlled firms strategically reduce investment in host countries under significant political influence of the United States. Our results are robust to alternative specification and two falsification tests. The findings suggest that the Chinese government uses FDI as a way of economic diplomacy.

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Corresponding author
Corresponding author: Francisco Urdinez, Institute of Political Science, Pontifical Catholic University of Chile, Santiago, Chile. e-mail: furdinez@uc.cl
* Jing-Lin Duanmu, Business School, University of Surrey, Surrey, UK. e-mail: j.duanmu@surrey.ac.uk
Footnotes
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We want to thank participants of the 10th International Conference on the Chinese Economy, held at CERDI-IDREC, University of Auvergne, France, and participants of the 10th China Goes Global conference held at the University of Macerata, Italy, for their valuable comments. This paper was supported by the São Paulo Research Foundation (FAPESP), grants 2014/03831-3 and 2015/12688-2.

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