The effect of the Chinese government policies on outward foreign direct investment by domestic enterprises: A policy analysis

Abstract

China has issued several policies aimed at driving domestic enterprises to engage in outward foreign direct investments. By analyzing these policies, their impact appeared to have a double‐edged sword effect. As China's capital inflows remained far more significant than capital outflows, the Chinese government has issued several policies, including the “Go globally” strategy and the “The Belt and Road” initiative aimed at driving domestic enterprises to engage in outward foreign direct investment (OFDI). Using policy analysis technique, we analyze the OFDI‐related advantages that can be achieved to domestic enterprises under the influence of government policies to identify their impact. While the analysis shows that the Chinese government policies promoting OFDI for enterprises, stimulating domestic enterprises to expand globally also negatively impacts the OFDIs themselves.

Institutional Differences and the Choice of Outward Foreign Direct Investment Mode under the “Belt and Road” Initiative: Experience Analysis Based on China’s Manufacturing Enterprises

“…Column (2) and (3) show that the regression coefficient of the interaction term idiff*cd was significant at the 5% level after controlling for province and time fixed-effects, indicating that the influence of other factors had been effectively eliminated. Column (4) shows that, after controlling for both the control variables and the province and time fixed-effects, the interaction term coefficient was 0.559 and remained significant at the 5% level. This suggests that the signing of "Belt and Road" cooperation agreements has a positive moderating effect on the relationship between institutional differences and M&A by CMEs.…”

“…As such, the government has formulated a series of policy measures to help multi-national companies participate in international competition and cooperation and accelerate their international business operations; examples of these measures are the "going out" strategy and the "Belt and Road" Initiative. Some studies have found that, with the support of national policies and systems in China, OFDI has become one of the most effective and fastest ways for multi-national companies to obtain resources such as markets, technology, and talent [1][2][3][4][5][6].…”

The role of OFDI in home-country pollution: insights from LMDI and 3SLS approaches

“…Since then, a package of supporting regulations has been proclaimed to reduce and simplify the approval processes of international investment activities, for example, the Decision to Reform the Investment System in 2004 and the Administration of Approval and Filing of Overseas Investment Projects in 2014 (Fan et al 2004 ; Liu and Zhang 2020 ; Xia et al 2022a ). After that, companies can make independent investments and decisions with only ex-ante registering, filing, and reporting (Du and Zhang 2018 ; Pan and Al-Tabbaa 2021 ). As one of the leading participants in the world economy, China has achieved OFDI flows from about USD 10 billion in 2001 to USD 136.9 billion in 2019, ranking second only to the USA (UNCTAD 2022 ).…”