The role of the exchange rate in China’s outward foreign direct investment

Xinyun Ding; Nimesh Salike

doi:10.1007/978-981-13-0983-0_11

The role of the exchange rate in China’s outward foreign direct investment

Xinyun Ding, Nimesh Salike^*

^*Corresponding author for this work

Department of Economics

Xi'an Jiaotong-Liverpool University

Research output: Chapter in Book or Report/Conference proceeding › Chapter › peer-review

Abstract

This research estimates the impact of exchange rate and exchange rate volatility on Chinese outward foreign direct investments (OFDI) utilizing panel data in 21 countries from 2004 to 2013. A basic gravity model and fixed effect model are applied to find that both market-seeking motivation and economic openness are positive determinants for Chinese OFDI. A depreciated host country currency is more favorable for Chinese OFDI. On the contrary, exchange rate volatility has adverse effects, meaning Chinese OFDI declines with exchange rate volatility. There is no obvious evidence to support that China has a preference to choose developed or developing countries as its OFDI host countries.

Original language	English
Title of host publication	The State of China's State Capitalism
Subtitle of host publication	Evidence of Its Successes and Pitfalls
Publisher	Palgrave Macmillan
Pages	263-285
Number of pages	23
ISBN (Electronic)	9789811309830
ISBN (Print)	9789811309823
DOIs	https://doi.org/10.1007/978-981-13-0983-0_11
Publication status	Published - 1 Jan 2018

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AB - This research estimates the impact of exchange rate and exchange rate volatility on Chinese outward foreign direct investments (OFDI) utilizing panel data in 21 countries from 2004 to 2013. A basic gravity model and fixed effect model are applied to find that both market-seeking motivation and economic openness are positive determinants for Chinese OFDI. A depreciated host country currency is more favorable for Chinese OFDI. On the contrary, exchange rate volatility has adverse effects, meaning Chinese OFDI declines with exchange rate volatility. There is no obvious evidence to support that China has a preference to choose developed or developing countries as its OFDI host countries.

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The role of the exchange rate in China’s outward foreign direct investment

Abstract

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