Provincial Interdependence and China’s 'Irrational' Outward Foreign Direct Investment

Autor:	Mengheng Liu, Xingwang Qian
Rok vydání:	2020
Předmět:	Economics and Econometrics 050208 finance media_common.quotation_subject 05 social sciences Foreign direct investment International economics Interdependence Spillover effect Irrational number 0502 economics and business Economics 050207 economics China media_common
Zdroj:	Open Economies Review. 32:153-181
ISSN:	1573-708X 0923-7992
DOI:	10.1007/s11079-020-09589-0
Popis:	China’s outward foreign direct investment (OFDI) has increased by more than 70-fold since early 2000. A sudden plummet of 30% OFDI in 2017 particularly merits explanation. We suggest that the interdependent behavior of Chinese provincial OFDI plays a key role in the astonishing increase and sudden decease in China’s OFDI. Using OFDI data from 31 Chinese provinces, we find that OFDI from one province positively depends on neighboring provinces’ OFDI. While the spillover from neighbors’ behavior increases provincial OFDI, it tends to lead to more OFDI than warranted by economic fundamentals, resulting in an irrational OFDI bubble. Further, we argue that the “follow the leader” firm behavior and the OFDI promotional policies under China’s political tournament environment give rise to the neighboring interdependence. Finally, based on our results, we make a plausible estimation of the amount of irrational OFDI in China in 2016.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::1d0483082c2f3b008ff33b28277a7ee5 https://doi.org/10.1007/s11079-020-09589-0 Zobrazit plný text záznamu Full text from SpringerLink