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Assessing the Scale and Potential of Chinese Investment Overseas: An Econometric Approach
Author(s) -
Armstrong Shiro
Publication year - 2011
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/j.1749-124x.2011.01248.x
Subject(s) - foreign direct investment , china , destinations , frontier , benchmark (surveying) , international economics , econometric model , investment (military) , economics , scale (ratio) , business , econometrics , macroeconomics , geography , political science , cartography , tourism , archaeology , geodesy , politics , law
The recent rise in Chinese outward direct investment (ODI) has significant global implications and impacts on host country policy. The present paper attempts to provide a theoretical basis and to define a robust econometric approach to assess the performance and potential of Chinese ODI. In this paper, foreign direct investment (FDI) performance is estimated using a frontier FDI model to measure how foreign investors, especially China, and the recipients of this direct investment perform relative to a benchmark of potential FDI. The results show that Chinese ODI achieves less of its potential compared with other investors. However, its ODI to Australia has performed much better than investment to other destinations. The results suggest that Chinese policy‐makers should look at the pattern of China's ODI and, in light of superior performance in destinations like Australia, adjust policy strategies and institutional arrangements to enhance performance and reduce barriers to Chinese ODI.