China's outward foreign direct investment

Leonard K CHENG, Zihui MA

Research output: Working paperWorking paper series


In this paper we provide a systematic analysis of the size and composition of China’s outward FDI in 2003-2005. Despite the attention given to China’s recent outward FDI and the prospect that it will continue to surge upward, its investment flows and stocks were smaller than those of some small industrial economies and some emerging developing economies as of 2005. The bulk of China’s FDI was made by firms owned by or associated with different levels of governments, including its largest multinational companies. By the end of 2005, business services accounted for the largest share of China’s outward FDI stock (28.9%), to be followed by wholesale and retail, mining and petroleum, transportation and storage, and manufacturing. The true breakdown of the destination of China’s FDI was basically unknown because a predominant share of its FDI in recently years was made in the world’s tax havens, An empirical analysis reveals that the host economies’ GDP had a positive impact whereas their respective distances from China had a negative impact on attracting FDI from China. Their per capita GDP had no impact on FDI flows but a negative impact on FDI stocks. Cultural proximity was a positive factor in attracting China’s FDI to the host economies that speak the Chinese language. China’s future FDI outflows are forecast based on its own past experience, international experience, and Japan and South Korea’s experience with FDI outflows. Our baseline forecasts based on the experience of many FDI source economies indicate that China’s aggregate FDI outflow will reach US$20 billion around 2008, US$30 billion in the early 2010’s, and US$50 billion by 2015. In more optimistic forecasts based on the experience of Japan and South Korea, the first two thresholds will be reached one year earlier and the third threshold will be reached five years earlier.
Original languageEnglish
Place of PublicationChina
PublisherRenmin University of China
Number of pages36
Publication statusPublished - 2007
Externally publishedYes

Publication series

NameSERUC Working Paper
PublisherRenmin University of China


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