Dispersion or Agglomeration

Abstract

The paper analyzes the agglomeration of China's OFDI across 35 industries in 43 countries from 2014 to 2019 to provide a characterization of China's international production system and its dynamic changes. It examines how digital service trade barriers and regulatory heterogeneity impact China's OFDI agglomeration. The paper finds that China's OFDI distribution shows a trend of agglomerating at the host country-industry level year by year, especially in capital-intensive and technology-intensive industries. Empirical results indicate that digital services trade barriers significantly hinder the agglomeration of China's OFDI. Digital service trade barriers negatively affect OFDI agglomeration in technology-intensive industries and positively affect it in labor-intensive industries. Deconstructing digital service trade barriers in different policy areas, the paper finds that the negative impact of infrastructure and connectivity and intellectual property rights is greater than that in electronic transactions, while the impact of barriers in the payment system is not significant.