Outward Foreign Direct Investment and Export Performance in China

Abstract

As one of the world's major exporters, China has witnessed a substantial increase in its outward foreign direct investment (OFDI). This article examines the effects of export-driven factors on China's OFDI through export-supporting and export platform. On the basis of 2003–2010 panel data from 144 countries and regions, including Canada, we find a strong effect of rising exports on China's OFDI. In addition, the export platform is an important part of China's OFDI, and this trend has strengthened in recent years. Moreover, markets of neighbouring host countries do not have a significant effect on the OFDI. China's OFDI has an obvious agglomeration effect in the host countries, particularly in high-income countries. The empirical results suggest that China should pay attention to the dual effects of its export-supporting and export platform on OFDI. The government should guide enterprises to implement a mixed international trade and investment strategy and build a platform of networking investment to protect firms' overseas investments.