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Exporting National Champions: China's Outward Foreign Direct Investment Finance in Comparative Perspective
Author(s) -
Gallagher Kevin P.,
Irwin Amos
Publication year - 2014
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12089
Subject(s) - china , foreign direct investment , business , international economics , incentive , east asia , globalization , economics , international trade , financial system , market economy , political science , macroeconomics , law
We examine the extent to which Chinese development banks have financed the globalization of China's “national champion” firms: specifically, through outward foreign direct investment (OFDI). We create a database of Chinese finance for OFDI and compare our results to the existing literature and available data on Japan, Korea and other Asian nations. We estimate the total value of China's OFDI finance from 2002 to 2012 at US$140bn. As a percentage of total OFDI, China's lending is roughly three times higher than Japan's, the previous global leader in OFDI finance. We identify two major reasons for China's high (31 percent) ratio of OFDI lending to total OFDI. First, China has a greater incentive to give OFDI loans than Japan or Korea ever did because its borrowers are state‐owned so it can more easily channel funds to targeted areas. Second, China has a greater capacity to give OFDI loans because it has significantly higher savings and foreign exchange reserves than Japan and Korea.