Chinese Foreign Direct Investment Outflows and Host Country Economic Growth

Abstract

We examine how outward Chinese Foreign Direct Investment (FDI) flows affect the economic growth of 41 host nations over the 2005 to 2021 period. We also investigate the indirect effects of outward Chinese FDI flows on the economic growth of these countries through the government effectiveness and human capital channels. The empirical results reveal that Chinese FDI has significant positive impacts on host country economic growth. Significant threshold effects, however, are detected on the indirect impacts of FDI flows on host countries through the government effectiveness and human capital channels. The results suggest that when government effectiveness and human capital in host countries exceed a certain threshold, that Chinese FDI does not necessarily lead to economic growth in the group of countries under study.