Transformations  in
Business & Economics

IMPACT OF CHINA'S POLITICAL INFLUENCE ON CHINESE OFDI LOCATION
Xing Fan, Lei Wang

ABSTRACT. This study investigates the Impact of China's political influence on Chinese OFDI (Outward Foreign Direct Investment) location. The special pattern of Chinese OFDI has been a long-discussed topic over past ten years. Many scholars obtained different results by using different indicators and different data. In this paper, we adopt an institutional-theory perspective and use resource-dependence theory to strengthen our understanding on Chinese OFDI. We try to take China's political influence into consideration to identify the mechanism of China's political influence to affect Chinese OFDI location. Summarizing the previous scholars' discussion, we distinguish two dimensions of China's political influence bilateral political relation and host country's dependence on China and use the detail indicators instead of simply divide host country into developed countries and developing countries. We assume that the special pattern of Chinese OFDI is mainly caused by China's different political influence on different countries. We test our hypotheses by using panel data consisting of a sample of 113 destination countries of Chinese OFDI from 2003 to 2015. We find strong support for the hypothesis that China's political influence on different countries is a key reason of the special pattern of Chinese OFDI. The strong political influence of China can promote OFDI directly. The subsample of developing countries indicates that the political relationship between China and host countries negatively mediates the effect of political risk on China's OFDI stock in those countries.

KEYWORDS: OFDI, political influence, location, China.

JEL classification: M2.