4. Análisis de la información
4.2 Taller complementario
There is a plethora of studies on China as one of the top recipients of international capital. At the same time, the role of China as a global capital provider has received little attention. Admittedly, China’s overseas investment is quite small compared with both the size of its
economy and the investment levels of other top outward investors. China’s ODI, nonetheless, has
been growing quite rapidly in the last few years. In 2005, China ranked 27th among all the
outward investors and 4th among developing countries excluding offshore finance centers
(UNCTAD, 2006) and was perceived to be an important source of financing for developing countries in the near future. Thus, it is of both academic and policy interest to systematically examine China’s ODI behavior.
In this exercise, we investigate the empirical determinants of China’s ODI. The
determinants include those drawn from extant theory on overseas investment and those deemed relevant to China’s circumstances. We also anticipate that China’s investments in developed and developing countries are driven by different (policy) factors.
The empirical findings confirm that China displays different types of investment behavior across developed and developing countries. Subject to the differences between developed and developing countries, the results suggest that a) the presence of the market seeking and resources seeking motives, b) the Chinese exports to developing countries tend to induce China’s ODI, c) the recent surge in the Chinese holding of foreign exchange reserves promotes its ODI in developed countries, and d) the Chinese capital displays different types of agglomeration behavior across developed and developing countries. The interaction variables included in the regression analysis attest to the changes in China’s overseas investment policy. We do not find substantial evidence that China mainly invests in African and oil-producing countries for natural resources. Even though it is encouraging to observe that alternative ODI data sources yield
similar results, we are aware of the uncertainty about the quality of China’s ODI data.18 By and large, the empirical results illustrate the relevance of both standard ODI determinants and some China specific factors.
The global economy is feeling the impact of China’s re-emergence. Besides its production and trade prowess, China is strengthening its outward investment activity. As a
relatively new outward investor, China’s direct investment abroad is relatively small. According
to the 2005 UNCTAD’s Outward FDI Performance Index, China ranked 71st in the world.19
With its huge trade surplus and holding of international reserves, however, China has great potential to expand its outward investment activity.
There are clues that China is actively promoting its investment activity abroad. In
addition to the “going global” policy, China is posed to increase its portfolio investment capacity in overseas markets. For instance, the recently implemented qualified domestic institutional investors (QDII) program is a controlled measure that allows Chinese citizens to invest in overseas equity markets. Another sign of China’s intent to promote its outward investment is the establishment of the sovereign wealth fund – China Investment Corp. Very likely, China’s overseas portfolio investment will make its presence known in the global financial market in the near future. When more data on portfolio investment are available, it will be of interest to assess China’s overseas investment policy using data on both ODI and portfolio investment.
18 To be fair, there is a general concern about the quality of statistics on FDI from
developing and transition countries (UNCTAD, 2006).
19 The index compares an economy’s share of world outward FDI against its share of world
GDP. The Inward FDI Performance Index is defined in a similar manner using inward FDI. In 2005, China ranked 55 according to the Inward FDI Performance Index ((UNCTAD, 2006).
Appendix A: Additional Figures
FigureA.1: The geographic distribution of China's ODI stock - Hong Kong and Macau excluded
1991 1998 2005
Note: Data are from Almanac of China's Foreign Economic Relations and Trade, various issues.
0% 10% 20% 30% 40% 50% 60%
Figure A.2: The distribution of China's ODI stock among the top 10 developed countries 0 50 0 10 00 15 00
Y1991 Y1997 Y2001 Y2005
Figure A.3: The distribution of China's ODI stock among the top 38 developing countries – Hong Kong and Macau excluded
0 20 0 40 0 60 0 80 0 10 00
Y1991 Y1997 Y2001 Y2005
Appendix B: Country Groupings
Countries in the sample are listed according to various grouping criteria.
B.1 Developing Countries:
Africa: Algeria, Gabon, Ghana, Guinea, Mali, Mauritius, Nigeria, South Africa, Sudan, Tanzania, Zambia;
East Asia: Cambodia, Hong Kong, Indonesia, Korea, Laos, Macau, Malaysia, Mongolia, Philippines, Singapore, Thailand, Vietnam;
Eastern Europe and Former Soviet Union: Kazakhstan, Kyrgyzstan, Poland, Romania, Russia;
Middle East: Egypt, United Arab Emirates, Yemen; Oceania: Papua New Guinea;
Latin America: Argentina, Brazil, Chile, Mexico, Peru, Venezuela; South Asia: India, Pakistan.
B.2 Developed Countries:
Australia, Canada, Denmark, France, Germany, Italy, Japan, New Zealand, the United Kingdom, the United States
B.3 Oil Exporters:
Algeria, Canada, Egypt, Gabon, Indonesia, Kazakhstan, Mexico, Nigeria, Russia, Sudan, United Arab Emirates, the United Kingdom, Venezuela, Yemen.
Appendix C: Variable Definition and Data Sources
ODI China's approved outward direct investment scaled by the host country’s
population, in logs. [Source: Editorial Broad of the Almanac of China's Foreign Economic Relations and Trade (1992-2006)]
GDP The ratio of host country's nominal GDP to China's nominal GDP in current
US dollar. [Source: World Bank, World Development Indicators]
RGDPpc The ratio of host country's real per capita GDP to China's in constant 2000
US dollar. [Source: World Bank, World Development Indicators]
GDPG Host country's real GDP growth rate. [Source: World Bank, World
Development Indicators]
Risk The aggregated political risk index of each host country. The index
comprises 12 components: government stability, socioeconomic conditions, investment profile, internal conflict, external conflict, corruption, military in politics, religion in politics, law and order, ethnic tensions, democratic accountability, bureaucracy quality. [Source: The International Country Risk Guide]
Wage The ratio of host country’s average annual wage of manufacturing industries
(ISIC 3) to China’s. The wage data are converted into US dollar using average period exchange rate. [Source: The UN International labor
Organization LABORSTA, Geneva and International Financial Statistics]
Fuelx The share of fuels exports to total merchandise exports. [Source: World
Bank, World Development Indicators]
Orex The share of ores and metals exports to total merchandise exports. [Source:
World Bank, World Development Indicators]
Raw The share of raw material (including fuels, ores and metals) exports to total
merchandise exports. [Source: World Bank, World Development Indicators]
XShare China’s exports to a country normalized by world’s total export to the
country. [Source: IMF Directions of Trade]
Aggl The ratio of China’s ODI stock in a host country to total China’s ODI stock.
[Source: Editorial Broad of the Almanac of China's Foreign Economic Relations and Trade (1992-2006)]
Trend Time trend.
Reserve China's total international reserves, including gold, scaled by China's
nominal GDP (Current USD). [Source: World Bank, World Development Indicators]
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