1. AN EMPIRICAL ANALYSIS OF CHINESE
OUTWARD FOREIGN DIRECT INVESTMENT:
THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
Relatore:
Chiar.ma Prof.ssa Grazia Domenica Santangelo Alessandra Florio
Università degli Studi di Catania
Corso di Laurea Magistrale in
INTERNAZIONALIZZAZIONE DELLE RELAZIONI COMMERCIALI

2. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
HISTORICAL OVERVIEW
 The period 1978-1985: Open door policy
 The period 1985-2000: “Provisions Governing Control
and Approval Procedures for Opening Non-Trade
Enterprises Overseas”
 The period after 2000: China's entry into the World Trade
Organization
Top five countries, FDI outflows, US dollars in million, 2014
Source: Author’s elaboration based on data from UNCTAD FDI database.

3. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
HISTORICAL OVERVIEW
Chinese OFDI flows, annual, 1982-2014
Source: Author’s elaboration based on data from UNCTAD FDI database.
 The
period
1978-1985
 The
period
1985-2000
 The
period
after 2000

4. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
HOST INSTITUTIONAL CONTEXT
SOFT INSTITUTIONS
 Intangible aspects
 Rules that are not
formalized, but exist –
culture, ethics
 When rules fail, informal
institutions substitute them
 MNEs use private means,
such as personal
connections, to reduce
uncertainty
HARD INSTITUTIONS
 Tangible aspects
 Transport and physical
infrastructure
 High accessibility to the host
market and low transport
costs
 MNEs have to operate with
less efficiency, as they have to
build their own infrastructure

5. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
1) Does the level of infrastructure in the host
country deter or attract Chinese OFDI?
2) Is this relationship moderated
by the host country type?
RESEARCH QUESTIONS

6. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
DOES THE LEVEL OF INFRASTRUCTURE IN THE HOST COUNTRY DETER OR ATTRACT CHINESE OFDI?
Hypothesis 1
CHINESE OFDI
 Low attention to profitability
 Lack of corporate governance mechanisms
 Obligation to achieve the country’s strategic goals
 Ability to operate effectively in the harsh business
environment of emerging markets
INFRASTRUCTURE
LEVEL
-

7. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
IS THIS RELATIONSHIP MODERATED BY THE HOST COUNTRY TYPE?Hypothesis 2
 Obtain raw materials
 Improve the host business environment
 Obtain preferential arrangements
 Secure specific investment opportunities
 Create regional cooperation encouraging the competitiveness of
its MNEs
In developing countries, the Chinese government use
the promotion of infrastructure as a bargaining vehicle to:
CHINESE OFDI
INFRASTRUCTURE
LEVEL
DEVELOPING COUNTRIES’ INFRASTRUCTURE
+
-

8. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
RESEARCH DESIGN - DATA COLLECTION
 Controlling for a number of location drivers
 In cases of missing data, I interpolated the available data
 To obtain linear functions in the parameters data are
transformed into natural logarithms
HOST COUNTRIES’ INFRASTRUCTURE
World Bank’s Logistic Performance Index database - 2015
CHINESE OFDI 2008 -2012 to 141 destination countries
(107 developing, 34 developed)
(SOURCE: UNCTAD’s Bilateral FDI Statistics database - 2014)

9. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
THE MODEL - The determinants of Chinese OFDI
𝑳𝑶𝑭𝑫𝑰 𝒅𝒕 = 𝜶 + 𝜷𝑳𝑰𝑵𝑭𝑹 𝒅𝒕−𝟏 + 𝜷𝑫𝒊𝒏𝒈 𝒅
+ 𝜷𝑳𝑮𝑫𝑷 𝒅𝒕−𝟏 + 𝜷𝑳𝑵𝑨𝑻𝑼𝑹𝑨𝑳 𝒅𝒕−𝟏
+𝜷𝑳𝑷𝑨𝑻𝑬𝑵𝑻 𝒅𝒕−𝟏 + 𝜷𝑳𝑷𝑺 𝒅𝒕−𝟏 + 𝜷𝑳𝑬𝑿𝑷 𝒅𝒕−𝟏
+𝜷𝑳𝑶𝑷𝑬𝑵 𝒅𝒕−𝟏 + 𝜷𝑪𝑷 𝒅 + 𝜷𝑳𝑫𝑰𝑺 𝒅 + 𝜷𝑳𝑬𝑹𝑨𝑻𝑬 𝒅𝒕−𝟏
+𝜷𝑳𝑰𝑵𝑭𝑳 𝒅𝒕−𝟏 + 𝜹𝟐𝟎𝟎𝟖 𝒅 + 𝜹𝟐𝟎𝟎𝟗 𝒅 + 𝜹𝟐𝟎𝟏𝟎 𝒅 + 𝜹𝟐𝟎𝟏𝟏 𝒅 + 𝜺𝒊
Dependent variable
Annual OFDI from
China to the
destination country d
at time t
Level of infrastructure of the
host country d at time t-1
The index ranges from 1 to 5
-
Independent variable
Equal 1 if the host country d
is developing
Control variable
Cultural proximity
of the host country
d to China

10. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
OLS RESULTS
Note: ***p<0.01, **p<0.05, *p<0.1
Model 1 Model 2
Full Sample Developed Developing
Coefficient Robust
Standard
Error
Coefficient Robust
Standard
Error
Coefficient Robust
Standard
Error
LINFR -1.43*** .502 -.951 1.42 -2.08*** .511
D_ing .552* .300
LGDP .500*** .098 -.087 .416 .556*** .101
LNATURAL -.012 .049 .178 .109 -.088* .053
LPATENT -.170*** .037 .445* .178 -.206*** .040
LPS -.052 .159 -.659 1.09 .100 .159
CP .994*** .171 1.11*** .394 .716*** .194
LDIS -.636*** .160 -.106 .739 -.746*** .172
LEXP .413*** .093 .580* .317 .383*** .103
LOPEN .461*** .108 1.54*** .328 .505*** .129
LERATE .074*** .027 .063 .100 .093*** .027
LINFL -.017 .032 -.415 .866 -.010 .034
YEAR_2008 .130 .245 .996** .491 .060 .265
YEAR_2009 .647*** .242 1.55*** .506 .287 .262
YEAR_2010 .671*** .243 1.58*** .483 .361 .264
YEAR_2011 .911*** .243 1.72*** .438 .821*** .271
N 468 125 343
R2 0.427 0.567 0.471
F 27.00*** 21.25*** 26.24***

11. AN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTUREAN EMPIRICAL ANALYSIS OF CHINESE OFDI: THE ROLE OF THE HOST COUNTRY’S LEVEL OF INFRASTRUCTURE
CONCLUSION
 Chinese MNEs are attracted by countries that
are on fringe of competitiveness in terms of
infrastructure
 Importance of developing countries’ as
destination of business of Chinese MNEs
 Necessity to consider China’s model as
extraordinary with respect to the conventional
model
 The study offers for the first time the opportunity to examine
the role of host countries hard institutions in the expansion
model of Chinese MNEs

12. Thanks for your attention
All rights reserved.
The findings, interpretations, and conclusions expressed herein are those of the author.